Special Series (Part 1): An Imbalance in South Africa's Coal Industry

Editor's Note: The following is the first installment of a series assessing what infrastructure requirements are needed for southern Africa — South Africa, Mozambique and Botswana — to capitalize on its coal-production potential.

South Africa is one of the largest coal-producing countries in the world. Of the 250 million tons the country produces each year, roughly 71 million tons are exported on the global market, making South Africa the sixth-largest coal exporter in the world.

Yet, the country is failing to fully capitalize on its coal-production capability. Almost all of South Africa's exported coal passes through the Richards Bay Coal Terminal (RBCT) — the largest of its kind in Africa — but the infrastructure linking the RBCT to coal-producing regions cannot meet the RBCT's export capacity. With demand expected to grow in export destination countries, such as India and China, the South African government and mining officials would like to capture these untapped revenues.

South African national transportation company Transnet is planning to inject about $36 billion in infrastructure development over the next seven years. The purpose of the development projects is threefold. A more robust infrastructure will deliver more coal to the RBCT, which in turn will be able to export more of the energy commodity to external markets. Moreover, rail infrastructure built proactively will allow South Africa to transport coal from new mines once existing mines are depleted. Last, Botswana, South Africa's northern neighbor, has robust coal reserves but likewise is hamstrung by substandard transport infrastructure. Providing Botswana a route for coal exports will guarantee South Africa's position as the only serviceable transport corridor in southern Africa.