The South African Competition Commission is pushing for levies on export thermal coal as it seeks to shore up domestic supplies. The move comes amid fears a proposed merger between Xstrata and Glencore could endanger domestic access to thermal coal.

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-- The South African Competition Commission has added its voice to government calls for levies on certain grades of export coals – a development which may have an effect on the coal business of Glencore and Xstrata, assuming the proposed merger between them is approved by shareholders later this year.In a review of the proposed US$33B Glencore-Xstrata merger, the commission said that it examined the domestic market for thermal coal to see how the merger would affect the biggest users of thermal coal, in particular Eskom, the electricity utility, and other industrial customers.Although it found the merger did not negatively affect domestic coal users, concerns raised by users regarding the merger could be resolved through “… regulatory instruments in the mining rights regime that allow government to impose conditions relating to the pricing and supply of mineral resources …”.The commission, which has referred its findings to South Africa’s Competition Tribunal for a final ruling on the merger, also cited proposals in the country’s National Development Plan to foster cooperation between the coal industry, government and end-users of coal. “To strike this balance, it is suggested that detailed planning is done and that measures such as conditions in mining licences and export permits for particular grades of coal are introduced,”the commission said.Explaining the importance of the ruling in respect of coal exports, Chris Charter, a director of attorneys Cliffe Dekker Hofmeyr, and who specialises in competition law, said it was interesting that the commission had “joined the refrain” for special control over certain parts of South Africa’s export coal market. “I wouldn’t be surprised if behind the scenes they are discussing a way in which the market and licences can be regulated,” Charter said in a telephone interview.“It seems that while the commission has approved the merger, the merger investigation has caused the commission to look closely at the industry and perhaps work closer with stakeholders to tighten regulation through the MPRDA [Minerals and Petroleum Resources Development Act] and industrial policy measures; in this way, the merger investigation may yet have an impact on the merging parties as part of the broader industry,” Charter said.In terms of the proposed merger, some 180 employees would be retrenched, of which 80 were managerial positions and the balance consisting of “low level employees’, as the commission termed it. It recommended, therefore, that retrenchments be restricted to a maximum of 80 employees of managers and specialists while a two-year moratorium was extended to the 100 employees.For the full story, subscribe to Energy Publishing’s South African Coal Report. The South African Coal Report is published weekly and provides comprehensive analysis along with price, trade and tender information on the coal industry in southern Africa. To receive a free trial subscription, contact us at marketing@energypublishing.biz or visit http://coalportal.com/ . Alternatively, follow Energy Publishing Asia Pacific on LinkedIn, and join in on the discussion.