Officials and geologists from Oromia Mineral Development Authority traveled to Derbi Moye, one of the three coal rich woredas in Jima Zone located 70 kilometers from Jima town, three weeks ago. The team stayed there for two weeks mapping the coal sites with Global Positioning Satellite (GPS) and partitioning coal quarries, which they awarded to 42 large scale investors on October 31, 2021.
However, once the machines deployed by the investors began to break ground, most of the local farmers became less welcoming. The Authority brought-in the large scale investors under a 70/30 modality, a new arrangement under which farmers living on coal sites earn 30 percent of the net profit to be generated. Bands of local youth and farmers who have been growing coffee, khat, maize, barley and other crops in the coal rich woredas told The Reporter they need guarantee from the new coal miners.
Thousands of farmers in the three woredas have to give way now, with no compensation, but expect to share 30 percent of the profit. Although the new coal investors say that they have registered hundreds of farmers as shareholders, the farmers claim the investors tried to silence them by giving each of them just 100 birr or even less.
Coal mining started at Derbi Moye seven years ago through East Africa Trading and the endowment EFFORT, which has been supplying for Mesebo cement without the consent of locals. After the production halted due to conflict with local communities, mining resumed two years ago after Prime Minister Abiy Ahmed (PhD) came to power. Currently, East Africa shifted to another coal resource in southern Ethiopia, and its machines and quarries in Derbi Moye, have been transferred to another investor.
Even though over 91,000 tons of coal was traditionally produced from Jima zone last year, the area lacks infrastructure. Pitfalls where coals are mined unprofessionally without sustainable redevelopment are left open, and risk floods.
Traditional miners, usually local youth organized under associations, sale a ton of coal for 1,665 birr from their stock near the quarries. After passing through layers of intermediaries, large cement industries in the country finally buy it for 3,500 to 5,000 birr based on the quality. The quality level is determined based on the heat generating capacity of the coal, which could range anywhere between 1,500 to 4,500 kilo calories per kilogram.
Imported coal, mostly from South Africa, is washed and generates 6,000 kilo calories per kilogram. It costs a premium 17,000 birr per ton, up from 12,000 birr per ton three months ago, due to inflated logistic costs.
“The local community is not getting a penny from the coal market, which is benefitting only brokers and cement industries. This can cause conflict, if it is not handled appropriately,” fears Tesfaye Megersa, director general of the Authority. In the current fiscal year, the Authority plans to generate 250 million birr in tax revenue from the mining sector.
“The mining must be environmentally conscious, apart from benefitting the community and creating jobs. There are a lot of open pits in Jima since so many groups mine some coal and abandon the quarries without redeveloping the land. In Ethiopia, mainly in Jima, coal is currently being mined without a professional mining design. With no means to mine the high quality coal found deep in the ground, traditional mining leaves the coal underground in addition to its adverse impact on the environment,” warned Tarekegn Tadesse (PhD), a senior geologist and researcher at Addis Ababa Science and Technology (AASTU). Tarekegn has participated in crafting Ethiopia’s ten years Mining Sector Strategy.
“We believe the community should benefit. The new 70/30 modality is perfect. The locals can now share the net profit, but we have a lot of expenses,” said Addisu Gesesse, a renowned talent manager turned coal investor. He is one of the 42 investors that received license for multiple coal quarries in Jima. He also overtook quarries and machineries formerly run by East Africa at Derbi Moye. “The cost of the coal mining machineries is already taking me up to 50 million birr,” added Addisu.
Investors pay 25 percent tax, four percent royalty fee, five percent for government shareholding, license fees, land lease, and two percent for community benefit and redevelopment fund calculated based on their impact on the environment.
Each of the 42 new investors aims to produce 40,000 tons of coal annually, beginning from this year. “Even if they manage to realize half their promise, they can cover the national coal demand,” Zewdu Tadesse, mining license administrating director at the Authority told The Reporter.
The Oromia regional state produced 113,600 tons last year with a plan to supply 994,000 tons in the current fiscal year. Studies indicate that Ethiopia needs over 2.7 million tons of coal annually. Local supply increased from around 100,000 tons in 2018/19 to over 500,000 tons last year. Rough estimates indicate that there is close to 250 million tons of coal reserve in a major coal belt crossing Chilga, Jima, Kamashi and Dawro.
Amidst the rising tensions between locals and coal investors, the Ministry of Mines decided to stop importing local coal, which has been costing up to USD 280 million annually. The Ministry picked Sunshine Construction (Tolay), Haji Ture (capital cement), East Africa Trading, National Mining (NOC, at Arjo Didessa), Oromia Mining (Yayo), Real Mining (Jima) and other four private miners (kamashi) to plant coal washing plants within three months.
The washing plants weed-out impurities in the local coal and maximize its heat value to 6,000 kilo calories per kilogram. Each of the coal washing plants cost ETB300 million. According to sources, the Office of the Prime Minister and the Ministry are facilitating the Letter of Credit.
In the meantime, the Ministry is undertaking market assessments to set minimum price for local coal based on the grade of the product. In fact, the Coal Miners Association, which comprises 30 investors, is undertaking its own market assessment to set the minimum price.
“The association is the proper institution to set a reasonable price and protect miners’ interest,” said Wakgari Temesgen, general manager of Real Mining, which has been supplying coal to Dangote, Habesha and Derba cement factories. Real Mining undertook a detailed survey on a 2,034 hectare coal site at Derbi Moye.
Wakgari says his company has transferred 13 million birr to over 500 farmers and youth associated with the company, owning 30 percent of the profit. The 30 percent is deposited in their accounts quarterly. Real Mining has mined over 40,000 tons since it started operation two years ago.
“Actually, few investors share the 30 percent with locals. Even then, most of the locals sit and wait for the 30 percent without doing anything. This is making the locals rent seekers. Soon they will forget how to farm and feed themselves,” added Wakgari.
Coal demand and exploration is growing in Ethiopia following the operation of medium and heavy factories. Though coal quality and heat value, which is determined by the pit depth, vary even within a quarry, cement industries have been complaining about the poor quality of the coal. According to insiders, they mainly do so to drop the price.
“We must straighten the market chain and enable direct supply of coal to industries, cutting out the layers of intermediaries. We came not to trick the locals. Government has no other intention but to benefit this community and the country,” Tesfaye told farmers gathered at Derbi Moye.
“There has so far been no large scale mining in Ethiopia, except Legedembi. Especially coal mining practices need to be undertaken by large scale miners. Even the impurities in coal, like sulfur, are toxic to the environment. Generally, coal should not be mined without coal washing machines, which extract the impurity and change it to other byproducts like sulfuric acid,” said Tarekegn.
“Substituting coal import is ideal for Ethiopia’s industrialization. Countries need iron ore and coal for industrialization. Both are inseparable. For the next fifty years, coal will cover 50 percent of global industrial energy need. So, Cop26 will have no significant impact on banning coal. Even solar panels and wind farm materials have environmental impacts as they have to be dumped at huge sites after their use comes to an end,” stressed Tarekegn.
