CR17 Donor Becomes Biggest Eskom Coal Supplier In R1.5bn Deal

CR17 Donor Becomes Biggest Eskom Coal Supplier In R1.5bn Deal

The Competition Commission is facing criticism after approving a deal that will concentrate the market that supplies coal to Eskom to just two dominant players. A CR17 campaign donor is at the centre of Seriti Resources Holdings acquisition of South32’s SA Energy Coal’s (SAEC) 91.835% shares.

The South African Energy Forum (SAEF) was critical of the merger, which sees Seriti pay them R100 million up front at a total cost of R1.5 billion per annum in exchange for the majority of shares for 30 small coal mining companies. SAEF claim that the South32 companies, which will suffer business losses, will lead to just two companies having control over 72% of Eskom’s coal supply.

“Ignoring the concentration risk making Seriti the largest coal supplier to the only electricity provider at excessive cost-plus coal is not in the social or economic welfare of South Africans. The commission is creating the largest coal supplier to Eskom, in complete disregard of its role to create SMMEs,” read a statement from SAEF, as reported by IOL. In a statement released on September 6, the commission announced that it had recommended that the Competition Tribunal should approve the move for Thabong Coal, which is “wholly owned” by Seriti, to acquire South32’s SAEC “with conditions”.

The commission acknowledged in its own statement that Seriti will have a majority share of Eskom’s coal supply.

“The commission found that post-merger, Seriti would be the largest coal supplier to Eskom with a market share upwards of 30%,” read the commission’s statement. SAEF responded by saying that the Competition Commission is not fulfilling its function, which is to avoid situations where single entities are able to control the market.

“This transaction has been treated as if it was in the toilet paper sector as opposed to a matter of national energy security. The commission is actually creating a majority supplier to Eskom with four cost-plus contracts when junior miners have zero, which is the opposite of the purpose of the commission. It is concerning that the commission is creating a dominant player, which then poses the question of whether the commission is missing the point of its purpose in the market.”

Another concern over this major reconstruction of the Eskom apparatus, which Vice President David Mabuza promised to “fix”, is that the chief executive of Seriti, Mike Teke, who is at the centre of the merger, donated R600000 to the CR17 election campaign that has since been mired in allegations of money laundering and vote buying at Nasrec.

The commission’s spokesperson, Siyabulela Makunga, has denied that the body ignored SAEF’s complaints and that the process was carried out with scrutiny over a prolonged period of time.

“However, based on the entirety of the evidence and data available to it, the commission has adopted a view and approach that is different to that of SAEF. There is thus a difference of views between SAEF and the commission, rather than the incorrect and unfortunate characterisation that the commission has ignored the complaints raised,” said Makunga. “There were divergent views arising on the transactions, but all the submissions of all these various stakeholders were taken into account by the commission, which ultimately formulated its own independent views on all those submissions,” he said.

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