Johannesburg - Pressure is mounting for closer scrutiny of a business deal that could result in a mining company owned by a President Cyril Ramaphosa backer becoming Eskom's majority coal supplier.
Seriti Resources, whose chief executive Mike Teke donated large sums to the CR17 election campaign, is on the verge of acquiring South African Energy Coal (SAEC).
Owned by Australian group South32, SAEC supplied 14% of coal that Eskom used to produce electricity.
SAEC’s mines were in eMalahleni and Middelburg in Mpumalanga.
Seriti, an 84% black-owned mining company, already supplied 20% of Eskom’s coal.
Its takeover of SAEC, which was still to be approved by the Competition Commission and Eskom, could see it deposing Exxaro Resources as Eskom's largest supplier.
South32 announced last month that it had entered into exclusive negotiations with Seriti for the transfer of SAEC assets. Seriti was preferred out of 50 other companies.
Parliament has been asked to “interrogate” the transaction before it can be approved.
The Star has seen a letter by the South African Youth in Mining (Sayim) voicing opposition and asking for an intervention in the transaction.
Sayim chairperson Thato Abrahams said in the letter that it would be unjust for one company to enjoy the coal-supply dominance which Seriti sought.
“As young people operating within the mining industry, it's our collective view that the South32 divestment presents an ideal platform in the mining sector to catalyse genuine economic transformation through changing the ownership and control patterns of the mining sector in the country fundamentally,” Abrahams said.
“It is deeply unjust that in this country that we continue the pattern of the same groups being the ones who are given the opportunities while the rest watch on as spectators.”
Sayim said that Seriti would in effect supply more than 44% of Eskom’s coal after approval of the deal.
This was a combination of the 20% that it already supplied plus SAEC’s 14% and supply by the New Largo Coal, a mining group in which Seriti had a stake.
“It is our view, ultimately, that the young people of this country must refuse to participate only on the periphery on all matters of the economy,” Abrahams said yesterday.
Speaking independently, energy expert Ted Blom told The Star the Seriti deal should be scrutinised. “I think they need to be scrutinised because there is talk of irregular meetings between them and the mining ministry,” said Blom.
He was referring to reports that a Seriti team that included Teke and director Lefa Mbethe met senior department officials a week before South32 made its preferred bidder announcement.
“The bottom line is we know that a lot of players in Seriti are politically affiliated. The best thing to do is to have that contract subject to public scrutiny and then we can see for ourselves if everything is above board,” Blom added.
Teke’s previous involvement with the collapsed Gupta-owned Optimum Coal was another reason to scrutinise the deal, said Blom. Teke is the former Optimum chief executive.
“(The Optimum matter) still needs to be investigated by the Zondo Commission. There’s a good chance that there were some irregularities,” Blom said.
Eskom confirmed it had a role to play before approval of the deal.
“The sale transaction of South32’s SAEC coal assets has a few condition precedents, and among them are Eskom's consent in ceding the agreements from South32 to the successful bidder, Competition Commission consent and approval by the Department of Mineral Resources for the transfer of mineral rights,” said its spokesperson.
“Eskom will undertake its own due diligence process on the successful bidder and that has been shared with South32, when they informed Eskom of the intent to divest.”
But Eskom denied that Seriti stood to become its majority coal supplier. “Should Seriti successfully acquire South32’s coal assets it will not be the largest coal supplier to Eskom, however, but will be among the largest suppliers.
“We estimate that its supply share would increase to about 29%,” added the spokesperson.
Seriti rejected assertions of unfair dominance if the deal went ahead.
“Should an agreement be reached between ourselves and South32 on the sale of SAEC, we believe it is incorrect to argue that there would be issues of unfair dominance,” said a company spokesperson.
“These are largely complementary assets which are mined on an individual basis.
"Many of the mines are dedicated to particular power stations on a cost-plus basis.
“For these reasons, we believe that the combination of the assets does not lessen competition in the coal markets that we serve.”
Eskom stood to benefit immensely from sourcing coal from a stronger Seriti, the spokesperson said.
“Through the acquisition, Seriti will become a stronger and more capable business financially, with a larger balance sheet, and will therefore be capable of supporting Eskom in a more sustainable and robust manner,” added the spokesperson.
Seriti was confident of approvals from the Competition Commission and Eskom. “Neither of the parties would be pursuing the transaction if they were not confident of their ability to conclude it.”