BEE frustrates potential Indian coal sector investors

Indian industrial users are keen to invest in South Africa's coal mining sector but say they are frustrated by the struggle to find suitable partners.

Indian industrial users are keen to invest in South Africa's coal mining sector but say they are frustrated by the struggle to find suitable partners.

India imported just over three million tons of coal from South Africa in 2006 and is likely to take double that if it is available this year, Indian buyers attending an industry conference said.

Speaking on condition of anonymity, a number of would-be Indian investors said forming links with black-owned or black-controlled producers was part of their frustration. "We know that in South Africa we need a black economic empowerment (BEE) majority partner and we don't want to buy any assets outright," one major Indian coal importer said.

"But the difficulty we're facing is finding the right investment," he added. "Either we find that the coal quality is poor or we're not comfortable with the people involved."

"We go to the conferences and we talk to everybody and exchange business cards. We've talked to all the BEEs and they seemed keen to do something with us but then you never hear anything back," another major Indian coal importer said.

Security and performance guarantees are vital if Indian companies are to invest in South African coal or to sign term supply deals, but this has been hard to achieve, an Indian source said.

"Our company reputation rests on our commitment to our customers. We always perform even if the market moves against us and we lose money. Therefore we need BEE suppliers to put up performance bonds and they must commit and perform, as much as we do, or our reputation is in jeopardy," he said.

"We remain keen to invest; we're always looking for the right opportunities," he added.

BEE coal producers also attending the conference said they were also keen to establish term supply deals with Indian buyers but they too required performance bonds and guarantees. - Reuters

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