SA wants coal price cuts to avert economic collapse

South Africa is pushing coal producers to cut prices to help save Eskom, the indebted power utility that threatens to unravel the country’s finances.

“At these prices of electricity, this economy is going to collapse,” Mineral and Energy Resources Minister Gwede Mantashe said Thursday at mining conference in Johannesburg. “You have got to reduce the prices — what we are saying is coal producers must contribute in ensuring that is actually addressed.”

Read: Minister wants to cut Eskom’s coal costs

Eskom, which provides about 95% of South Africa’s electricity, relies on coal to generate most of its power. Several ministries last week approached both coal and renewable energy producers to ask for lower-cost supplies as the government scrambles to rescue the unprofitable state-owned utility.

“We are talking to them, we are not instructing them,” Mantashe said. “The steps are, one you talk to coal producers, they make a commitment, talk to renewables, they make a commitment.”

Coal producers plan more talks with the government over the supply and cost of the fuel, according to the Minerals Council South Africa, the country’s mining lobby.

“Careful consideration is being given to being mindful of competition regulation,” it said in a statement.

Eskom’s primary energy costs increased by 17% in its most recent financial year, due to higher coal charges and increased production from independent power producers.

© 2019 Bloomberg L.P.