Will coal’s demise be the making of SA’s Rust Belt?

In early 2017 Eskom announced the imminent closure of six coal-fired power stations by 2029: Hendrina, Kriel, Komati, Grootvlei, Arnot and Camden. All of these coal-fired power stations are in Mpumalanga, and within a 200km radius from each other.

Collectively, their power contribution to the national grid is about 11,000MW, representing as much as 26% of the 42,000MW national maximum output. The fact that these six coal-fired power stations will all be closed by 2029 must be cause for concern as they diminish reasonable prospects for reduced load-shedding in the medium to long term.

While there is consensus that there is an electricity generation deficit, of as much as the equivalent combined output of the six power stations scheduled for closure, reliable substitutes must be found for projected output loss in the interim period.

The proposed decommissioning will also have an adverse effect on the socioeconomic outlook of towns established around the power stations. Assuming the six coal-fired power stations also employ 25% (24,000 workers) of the 92,000 current total employment in the coal mining industry, the economic prognosis for families, households and towns in Mpumalanga looks bleak.

Mining accounts for 6.7% of employment in the province. In 2015 the Mpumalanga provincial Treasury reported that mining in the province had already shed 42,000 jobs between 2008 and 2015.

Whether the $8.5bn (R157bn at the February 2023 exchange rate) mobilised by the US, UK, France, Germany and EU towards SA’s just energy transition is sufficient to finance our electricity generation output before 2029 remains questionable.

Hostile act

While the Kusile and Medupi power stations were commissioned with initial budgets of R80bn each, to be completed by 2014, their cost overruns had exceeded R300bn by September 2022 — and due to their snag list they are still not fully operational, nine years after they were scheduled for completion.

In response to Eskom’s imminent closure announcement, Cosatu said that it “was not just an arrogant decision, but a hostile act of provocation directed at workers and their unions”.

SA already has an exceptionally high unemployment rate, making jobs and prospective job losses particularly sensitive, politically and socially. Such closures will also have material adverse effects on the local, provincial and national economies.

Other economic opportunities arise from multiplier effects — the proportional amount of increase, or decrease, in final income that results from an injection or withdrawal of capital — on the existence of coal mines and coal-fired power stations in Mpumalanga.

The potential impact of the closure of these coal-fired power stations and their associated impact on the total economic output of Mpumalanga thus has to be addressed — or we risk creating the SA equivalent of the US Rust Belt. Whether the best years of coal-fired power stations are behind us remains in question.

Valuable lessons can be learnt from the US Midwest states and their experience due to the collapse of the coal industry, steel production and manufacturing. The corollary was sharp declines in total jobs and increases in poverty rates.

• Luvhengo is executive director of black-owned mid-tier coal producer Ndalamo Resources. Dr Tshitereke is researching the potential socioeconomic impact of reducing SA’s reliance on coal-fired power stations.