South Africa: Anglo American coal spinoff Thungela faces emissions criticism ahead of AGM

By David Whitehouse
Posted on Tuesday, 24 May 2022 06:00

Cooling towers are pictured at a coal-based power station owned by Eskom in Duhva
Cooling towers at a coal-based power station owned by state power utility Eskom in Duhva, South Africa, February 18, 2020. REUTERS/Mike Hutchings

The first set of annual reports published by Thungela, the South African coal producer spun off by Anglo American 2021, have been attacked by shareholder activist group Just Share.

The “misleading” claims made by Thungela relate to areas including climate science, Just Share’s briefing says. Thungela holds its virtual AGM on 24 May.

The demerger meant that Anglo American offloaded its major environmental liabilities. Thungela produces thermal coal from seven mining operations in South Africa, most of which is exported to India and other Asian markets, the Middle East and North Africa. When it demerged from Anglo American in June 2021, Thungela set a target of reducing carbon emissions by 15% by 2025 from a starting point in 2016. It has yet to add any emission-reduction targets since then.

The initial target was reached in 2021 with a 17% reduction, but Just Share argues that this was due to external factors, such as Covid-19 and the underperformance of South Africa’s freight rail network. Thungela has said it will set intermediate emission reduction targets and develop a “pathway to net-zero by 2050” this year. The lack of a science-based climate strategy or emission reduction targets at Thungela should be a “serious red flag for investors,” Just Share says.

  • Thungela argues in its ESG report that there are nearly 800 million people who do not have access to electricity, many in markets in which it serves.
  • “We cannot sit back until society has decided which technologies are most suitable and appropriate for the energy demands of tomorrow, when the markets we serve are critically dependent on the production of high-quality coal today.”
  • Still, the company’s first ESG report acknowledges that “extreme weather conditions such as higher-intensity, less frequent rainfall and extreme heat” are among the range of risk factors which the company faces.
  • Just Share argues that renewable energy is already the cheapest way of expanding access to power.

Abandoned mines

South Africa’s long mining history creates local as well as global environmental dangers. The country has almost 6,000 recorded abandoned mines. Thungela’s ESG report says that it has “comprehensive mine closure and rehabilitation programmes” in place which “seek to return previously mined land to its original condition for sustainable use.”

That claim, Just Share says, is undermined by toxic spills from unrehabilitated and poorly rehabilitated mines. Just Share points to the spill of contaminated water from the old Kromdraai coal mine near Emalahleni on 14 February. The spill was caused by a failed concrete seal at one of the mineshafts. Fish and aquatic life was decimated in several rivers and streams, and experts have estimated it may take 15 to 20 years for the rivers to recover.

  • The incident followed a previous discharge of mine-impacted water at Kromdraai in November 2021. Such spills are inevitable, given “inadequate rehabilitation measures,” Just Share says.
  • Investors should insist that Thungela carries out a comprehensive audit of its unrehabilitated mine shafts and other liabilities which “are likely to cause major environmental incidents in future,” it adds.

The Africa Report approached Thungela for a response. The company did not address any of the points made and said it will respond to Just Share “in due course.”

Bottom line

Thungela will keep facing questions until it has developed a clear strategy on emissions reduction and auditing its mine shafts.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options