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Old King Coal’s relentless pursuit of a marginal economic zone in Limpopo

Lauren Liebenberg
By Lauren Liebenberg
25 Nov 2024
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Every minute and every rand of public money spent by the government on planning for Limpopo’s future is devoted to mining coal and shovelling it into blast furnaces on the edge of the coalpits to make unwanted steel, and emitting 33 million tons of carbon dioxide every year for the next 30 years.

At the 26th China Mining Conference held in Tianjin, China, in October 2024, South Africa’s Minister of Mineral and Petroleum Resources, Gwede Mantashe, boasted in his speech that in defiance of “concerted pressure by some lobby groups for the world to phase out coal”, South Africa now ranks in the top 10 coal-producing nations in the world.

“To put it bluntly,” he declared, “King Coal is back.”

To put it more bluntly, fossils like Minister Mantashe and his apartheid-era economic dogma should be retired. South Africa’s policymakers urgently need to rethink their regressive ideas about our natural resources if we are to seize the emerging opportunity that our remaining natural landscapes represent to dump the failing economic development models of the past, mitigate the climate and nature crises and accelerate inclusive economic growth.

At the crossroads between the sources of wealth creation in the 20th and 21st centuries lies the remote northern Vhembe District of Limpopo. The government is fixated on the region’s coal resource “endowment” despite the marginal viability of the Greater Soutpansberg Coalfield.

Since the closure of Exxaro’s Tshikondeni Mine at Pafuri in 2014, the former Department of Mineral Resources and Energy has optimistically granted mining rights — principally to MC Mining, a junior coal mining company that in September announced its takeover by Chinese coal producer, Kinetic Development — to develop 10 new open-cast coal mines on 110,000 hectares in the Limpopo River Valley, while the Department of Trade, Industry and Competition and the Limpopo provincial government pursue an industrialisation plan straight from the 19th century to support the coalfield’s exploitation.

The Musina-Makhado Special Economic Zone, a sprawling 60km² Chinese-backed industrial megaproject focused on crude steel production currently in the early stages of development, is meant to drive the expansion of coal mining in the region by creating a purpose-built local baseload off-taker for the coal mines, and by funding the upgrade of the rail links to the nearest seaport about 670km away.

Beyond coal profiteering, the economic case for a latter-day Iscor in the bushveld is weak. The economic zone will double annual steel output in South Africa, despite the chronic over-capacity that plagues the domestic steel industry presently being sustained by taxpayer handouts and protectionism from Chinese “dumping”.

Silent on socioeconomic impacts


Interestingly, the environmental impact assessment of the economic zone openly argues for its “crowding out” of older, dirtier local plants “with lower efficiencies and higher emissions”, but is silent on the socioeconomic impacts of precipitating yet more job shedding in the Witwatersrand rustbelts.

At the same time, the bulk infrastructure costs of overcoming the handicaps of the remote location for power- and water-greedy industry are pegged at an eye-watering R96-billion, and the scheme is dependent on building the so-called “Musina Dam”, a Cahora Bassa for the Limpopo River that rests on the flimsiest of feasibility studies.

If you squint hard enough, the economic rationale for strip mining the Vhembe region for its coal and cannibalising the local steel industry looks marginally better from the Chinese perspective, despite its chronic steel production surplus.

The Scoping Report for the ferrochrome smelter plant released for comment this month cites the benefits of cheap labour (235 jobs will be created), cheap chromium ore and coal “to provide cheap electricity for smelting” as well as offshoring pollution in a tax haven — the Musina-Makhado Special Economic Zone will “develop the advantages of China-Africa production capacity cooperation under the Belt and Road Initiative” and “transfer China’s excess steel capacity and reduce China’s high energy-consuming pollution”.  

Yet 10 years after MC Mining paid for the rights to the coal “discovery” offloaded by Rio Tinto and the signing ceremony for the South African Energy Metallurgical Zone took place in China (a full three years before the special economic zone was even designated in South Africa), the Musina-Makhado Special Economic Zone is still in planning, mired in legal battles and the coal remains buried beneath the baobabs.

Meanwhile, the world has moved on. “Peak coal” is already behind us and demand is in terminal decline. At the same time, seismic shifts are happening in our extractivist economic system that has valued all of nature only as a resource to convert to commodities.

Under newly introduced carbon taxes, including in South Africa under the Carbon Tax Act, polluters pay to use what remains of the atmosphere’s finite capacity to absorb greenhouse gases — which incentivises investment in decarbonisation. Depending on the tax regime, carbon emitters can meet a fraction of their tax liabilities or their voluntary net-zero commitments by paying for the restoration and protection of natural carbon sinks.

The invention of the tradeable carbon credit, produced from verified nature-based carbon reduction projects, has instantly turned nature into an asset worth investing in — converting healthy ecosystems into natural infrastructure that can generate revenue from the ecosystem services they provide, including carbon draw-down.

Realisable value


In our economic system where an oil spill in the Arctic has only a positive effect on GDP, where Glencore has a market cap of $59-billion while the Earth’s atmosphere is worth nothing, where trees only have monetary value if felled for their timber or the coal buried beneath them, carbon markets have suddenly put a price on the air we breathe and given living trees rooted in the soil hard, realisable value.

They have stopped the free plunder of the commons by polluters, are forcing the internalisation of externalised costs of pollution, making prices tell the truth. Whatever their flaws, the impact of these nascent markets for nature is revolutionary.

Today the global compliance carbon market is worth $850-billion while accounting for only 23% of global emissions, up from 5% a decade ago, and tax revenues collected by governments amount to about $100-billion. As carbon pricing nets widen and deepen across the world’s economies, demand and prices will only rise.

In response, many African countries are ramping up their exports of the carbon sequestration capacity of the continent’s vast forest and savanna biomes. Most of the front-runners in establishing bilateral carbon trade agreements under Article 6.2 of the Paris Agreement are African.

Rwanda, Malawi, Ghana, Ethiopia and Kenya have all created enabling regulatory frameworks and done deals with counterparts, including Singapore, Norway, Korea, Switzerland and Sweden.

The Africa Carbon Markets Initiative (ACMI) has secured $1-billion in intentions to buy and aggregate high-integrity African carbon credits by 2030 across seven African jurisdictions. South Africa, alas, doesn’t even rank in the top five African countries in terms of the continent’s carbon credit issuances, according to the World Bank.

Back to Limpopo’s Vhembe District, which as it happens, doesn’t only boast the stubbornly unprofitable Greater Soutpansberg Coalfield. The entire area is a Unesco-designated Biosphere Reserve in recognition of its outstanding biodiversity value.

According to analysis by Living Limpopo, the value of the biodiversity and carbon credit yield from the creation of the proposed Great Vhembe Conservation Area potentially exceeds the risk-adjusted value of the economically recoverable coal reserves.

As an added bonus of this competing land-use scenario, no dedicated power is needed, no water resources will be depleted, no pollution and environmental degradation will result, no damage will be done to the agricultural and tourism sectors and no harm will be caused to human health, or to the food and water security of poor, land-dependent communities or to our cultural heritage.

Conservation Plan


Instead, the expansion of the protected areas network and restoration programmes would produce income for poor, rural communities, as well as create the stimulus for a biodiversity-based economy in the Vhembe “mega-living landscape” and the growth of tourism, which rand-for-rand is 40 times more efficient at generating job opportunities than investment in mining, according to Limpopo’s own Conservation Plan.

Yet every minute and every rand of public money spent by the government on planning for Limpopo’s future is devoted to mining coal and shovelling it into blast furnaces on the edge of the coalpits to make unwanted steel, and emitting 33 million tons of carbon dioxide every year for the next 30 years.

In September, Limpopo’s new Premier, Dr Phophi Ramathuba, accompanied President Cyril Ramaphosa on his official state visit to China and attended the Forum on China-Africa Cooperation (Focac) in Beijing to promote Limpopo’s flagging dirty pet project.

New, albeit less auspicious, investors have been announced (compared to the Focac 2018 raft of memoranda of understanding) and a slew of new approvals processes launched.

At the annual Limpopo Investment Conference hosted by the Limpopo provincial government in Polokwane on 7-8 November 2024, keen investors were assured that while “there is always an attack on coal as a fossil fuel”, the Musina-Makhado Special Economic Zone would be “transforming the narrative on coal… which can create value and be aligned to the Just Transition”.

Indeed, unbowed by the UN Development Programme’s desertion earlier this year, the Musina-Makhado Special Economic Zone SOC has secured USAID-donated funds from the JETP (Just Energy Transition Partnership) pot, rather making a mockery of the Just Energy Transition Partnership aim of “helping South Africa transition away from coal and towards a low-carbon economy”.

Meanwhile, even as the Department of Forestry, Fisheries and the Environment argues for the inclusion of South Africa’s biosphere reserves in meeting its Global Biodiversity Framework “30x30” commitments, environmental authorisation has been granted to convert 125,000ha of natural vegetation, much of it critical biodiversity areas, to open-cast coal mining and heavy industry, amid huge controversy over the protected tree destruction permits issued, ultimately to create a new sacrifice zone for coal and steel out of the Vhembe Biosphere Reserve.

South Africa is at risk of failing to meet its commitments under the Paris Agreement — exposing our exports to “carbon leakage” sanctions under the European Carbon Border Adjustment Mechanism and its equivalents — and is ignoring its related UN Frameworld Convention on Climate Change obligations to “protect and enhance carbon sinks”.

Yet the effective carbon tax rate sits at $1.99/ton of CO2e after tax-free allowances, and Eskom is exempt — hardly likely to drive investment in decarbonising value chains and reversing the collapse of natural systems, or to swell the public coffers in dire need of a windfall, not least to pay for climate-change mitigation and adaptation.

As the ink dries on the long-awaited Article 6.4 agreement signed at COP29 this week, which is set to drive cross-border financial flows into nature-based climate solutions, South Africa seems unprepared to capitalise on its remaining natural assets.

Lingering policy uncertainty and schizophrenic planning trajectories are throttling the domestic carbon market and our carbon export potential, and we are being left behind, scrabbling in the dirt for more coal while our natural capital degrades.

It’s time our leaders abandon apartheid-era orthodoxy on the sources of sovereign wealth and seize the wild opportunity of the century to achieve truly transformative economic growth. DM

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