An unstable energy supply and an inefficient logistics system are the two biggest risks to local junior miners, says outgoing Minerals Council SA CEO Roger Baxter who has called for urgent intervention from the private and public sectors to resuscitate the economy.
“SA’s economy is in the intensive care unit. People can beat around the bush whichever way they want on the issue,” Baxter said, pointing to low growth and high unemployment rates.
Speaking at a stakeholders round-table hosted by the council, Baxter did not mince words in outlining that SA’s productivity rate has dwindled in recent years, largely because logistics and energy issues are eroding gains made elsewhere.
“If the electrons of the economy — effectively Eskom and energy — are not flowing then the system’s heartbeat is weak and that has a big affect on the body of the economy.
“If the vascular system — logistics — is blocked it also contributes to the body of the economy being in the intensive care unit.”
Baxter said despite all of SA’s incredible strengths as a country, particularly very capable business and financial sectors, which are world-class, a huge skills capability, historically excellent infrastructure and even Madiba magic, SA “is caught in … a structural straight jacket”.
Load-shedding, a failing logistics network and slowing global demand have constrained SA’s mining activity, with the latest electricity price hike adding further pressure to the already struggling sector.
Research shows that Eskom remains a source of baseload electricity supply for the mining industry because solar and wind energy is intermittent. The sector consumes about 14% of Eskom’s electricity. Add smelters and refineries and it consumes about 30% of the utility’s output.
Add cost
The CEO of the surface mining industry association Aspasa, Letisha van den Berg, said many small-scale mines have closed down because they cannot afford to run generators.
Transportation challenges members are facing add to the cost of doing business and has in some cases led to a rise in imports.
Vice-chair of the SA Diamond Producers Organisation Lyndon de Meillon backed the sentiment saying not only are members losing out on an hour of production each time they have to switch over to generators, but the quality of the electricity supply is also deteriorating, causing ripple effects on hi-tech machinery.
“We’ve probably added about an extra 10% cost because of load-shedding,” he said, “At times we sit without power for 12-34 hours because a fuse has dropped and they just aren’t able to get there and fix it in time,” he said highlighting that even Eskom’s maintenance is failing.
Inefficient ports and a fading railway system are also at the heart of the challenges that junior miners are grappling with, and producers are struggling to transport their products to market despite high global demand.
This has led to an increase in trucks on roads, putting pressure on that infrastructure. Moreover, the cost of using road over rail is much higher while there also seem to be too few trucks to handle the required capacity.
Executive director of Vuna group Crause Mabudafhasi said the coal export group has seen a reduction in the number of trains available to transport their product from six to one or two trains a month.
Scale back
“We had to resort to road transport to complement the gaps that arise as a result of Transnet which also affected our bottom line,” he said.
Mabudafhasi said the group also had to scale back on production by at least 10,000 tonnes because “we can’t have a situation where our coal stockpile is increasing when we don’t have the consistency of rail”.
Conversely, ChromTech CEO Jono Gay said increasingly trains are being allocated away from transporting chrome and prioritising coal, leaving a vacuum for chrome products, which are in high demand internationally.
Outlining that the sector aims to move 14-million tonnes a year, he said when contrasted with Transnet’s budgeted 5-million tonnes, it is clear that current capacity is inadequate and much of the product will have to be moved by road.
“We need to find collective solutions through private public partnerships because Transnet can’t do it on their own,” Gray said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.