Matshela Koko. Picture: FREDDY MAVUNDA
Matshela Koko. Picture: FREDDY MAVUNDA

Eskom does not intend compromising on the quality or costs of its coal supply while pursuing its target of buying only from companies that are majority black-owned, says interim group CE Matshela Koko.

Exxaro, Eskom’s biggest coal supplier, was more than 50% owned by a black consortium until the end of last month, when the consortium’s 10-year lock-up period ended. It is now negotiating to replace that structure with one that would reduce its black ownership to about 30%.

Last year Eskom implemented a policy of signing new coal contracts only with companies that are more than 50% black-owned, although the mining charter requires only 26%.

Exxaro supplies more than a third of Eskom’s annual requirement of about 110-million tonnes of coal. The rest is bought on long-term contracts with multinationals such as Anglo American, South32 and Glencore.

Koko said on Monday Eskom would soon ask Exxaro for a meeting to discuss how it intended to comply with the 50%-plus policy requirement.

Exxaro executive head of strategy Mzila Mthenjane said the company intended to engage with Eskom on the change to its black empowerment structure.

Exxaro’s latest annual report highlighted its dependency on Eskom — which accounted for 92% of its coal sales last year — as a risk factor.

The board said this risk increased after production at Matla Mine 1 had to be halted because Eskom delayed spending necessary capital and the coal supply agreement at Arnot mine was terminated.

Exxaro’s board said the measures it had taken to reduce dependency on Eskom included widening its local and international customer base.

The purchase of Exxaro Coal Central (formerly Total Coal SA) provided more export coal resources and an entitlement to ship through the Richards Bay Coal Terminal.

Koko said Eskom’s procurement of coal from 50%-plus black-owned suppliers was "a thorn in the side of many of the company’s main coal suppliers".

"What is actually happening is that the ongoing legacy of the pre-1994 economy is being confronted by the Eskom leadership," he said.

Eskom had grown its coal purchases from emerging black miners to R6.9bn — or 18% — of its total bill last year from R1.7bn — or 6% — in 2012. By 2020 it expected to spend R14bn on buying coal from emerging black miners.

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