SA’s electricity supply is once again being cut as up to 7,000 delegates from around the world gather in Cape Town to discuss mining at Africa’s largest resources conference.
The Mining Indaba, now 26 years old, is a good barometer of sentiment around SA’s mining industry and further afield, with much of the deal-making and intrigue happening away from the conference centre.
Messages delivered from many stages on diverse topics by ministers, CEOs, fund managers, mining lawyers and investors help in taking the pulse of SA’s and Africa’s resources sectors and enabling countries to lay out their stalls to attract investment.
For mineral resources and energy minister Gwede Mantashe the task is difficult. Electricity lies at the heart of mining and mineral processing.
Eskom, the state-owned power monopoly, resumed level two electricity cuts, removing 2,000 megawatts (MW) of supply to ensure the stability of the grid as it struggles with old, poorly maintained coal-fired plants.
Neither Eskom nor the government can put a time frame on when supply will be normalised. New Eskom CEO André De Ruyter warned on Friday of deeper power cuts as the debt-laden parastatal embarks on long-overdue, properly planned maintenance that was neglected by previous management.
The power cuts that began on Friday come at precisely the wrong time for Mantashe as he, of necessity, tries to attract foreign and local investment to the domestic mining sector in a slowing and moribund economy where unemployment is soaring.
“Eskom’s battle to keep the lights on deeply impacts mining production and revenue streams,” says EY Africa partner Khethiwe Cebekulu.
“We would ... be interested in how the minister sees self-generation impacting the sector,” she says.
SA’s mining companies are unable to get the signoffs from Mantashe and his newly added energy portfolio to build 869MW of solar power and up to 800MW of conventional power over the next three to four years.
It is likely to be a call the Minerals Council SA will reiterate on their public platforms at the conference and in discussions with Mantashe to expedite permissions to supply cheaper power to their operations and offset a damaging carbon tax.
The domestic chrome industry is undergoing restructuring because of the low price of the stainless steel ingredient, affecting both chrome ore suppliers as well as large ferrochrome producers, with the common theme of Eskom’s six fold price hikes since 2006 and erratic supply an added reason for the reduction in workforces.
Mantashe may be tempted to flag regulatory certainty his department has brought to SA mining, gazetting a third iteration of the Mining Charter, which steers the racial change in ownership and management of mining companies as well as obligations to communities. He also scrapped contentious amendments to the Mineral and Petroleum Resources Development Act.
However, the SA industry has lodged its opposition to certain clauses in the charter in court as a backstop in case talks with the ministry fail to resolve their concerns around the need to refresh empowerment ownership on the transfer or renewal of mining rights as one example.
In this regard, the Minerals Council SA’s participation and comments at the Indaba will be closely watched for clues on whether there is progress in resolving the impasse around the charter or whether it will be dragged through court, extending regulatory uncertainty.
“It is particularly important to recognise that the only route to long-term sustainability in the mining industry is to have certainty on regulatory policies and infrastructure security,” Cebekulu says.
SA is the host of the conference, but the topics of discussion and points of interests extend across the continent as fellow African countries compete to attract investment dollars, create jobs and wealth from their minerals.
SA has, for example, lost its top spot as Africa’s largest gold producer to Ghana.
SA is no longer the most sought after mining destination in Africa and it will require a fundamental rethink to restore it to its rightful place.
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