Competition in the coal industry is influenced by the small number of mines that have to meet the high demand for coal.
The large coal mining groups therefore have a firm grip on the industry, and while Eskom is struggling to keep up with its R440bn debt burden, its bargaining power has dropped to a low.
Mining houses are aware of the state of affairs, and two of the largest mines, South African Energy Coal (Saec) and Seriti Resources, are apparently in the midst of the battle to obtain contracts.
If the Competition Commission approves an agreement, 45% of all coal Eskom purchases will come from one mining group.
The rest of the coal at Eskom apparently comes mainly from the same mining house, which raises the question of how such an agreement can be reached with the Competition Committee’s approval