When the government lifted the licensing threshold for self-generation power projects from 1MW to 100MW, making it possible to generate energy from renewables including wind and solar without an onerous licensing process, there was widespread positivity about structural reforms.
But Roger Baxter, CEO of the Minerals Council SA, is not convinced there is urgency in removing red tape in allocating licences to renewable energy projects.
He said last week that red tape is delaying more than 30 projects in the mining industry, valued at more than R60bn, for the self-generation of electricity.
Rudi Dicks, head of the Project Management Office in the Presidency and who leads the team set up three weeks ago to unlock the 100MW embedded generation projects, said this week the process is bound to be complex given SA's maiden licensing of such projects.
“The objective is to get megawatts on the grid as quickly and as speedily as possible. We are working to assist in alleviating the constraints. Through the presidency, we have been able to pull together the different departments and deal with pending applications and unlock the projects. It is a complexity we are trying to resolve quite speedily,” he said.
The increase of the threshold to 100MW was viewed by experts as the government moving the needle on structural reform. Renewable energy projects enable companies to reduce their reliance on Eskom's unreliable supply, and partially avoid high tariff hikes that have stifled investment in new mines, while at the same mitigating the effects of climate change.
If the government expedited the processes to allow mining companies to build their pipeline of energy projects, it would take tremendous pressure off Eskom and the national supply of electricity
— Minerals Council spokesperson Allan Seccombe
Minerals Council spokesperson Allan Seccombe said even though mining companies aim to generate electricity, Eskom will remain the supplier of baseload electricity for the mining industry because renewable energy sources are unable to provide a reliable, 24-hour flow of electricity throughout the year.
He said Eskom management has said the utility needs more than 4GW of additional electricity generation now to allow it to efficiently run maintenance programmes.
“If the government expedited the processes to allow mining companies to build their pipeline of energy projects, it would take tremendous pressure off Eskom and the national supply of electricity,” said Seccombe.
A senior executive in the mining industry described the department of mineral resources & energy (DMRE) as “a bureaucratic nightmare”. He said the department is understaffed and to some extent incapable of doing its job.
Tshepo Seema, a director at Mbali Coal in Mpumalanga, agreed that the DMRE offices are a shambles. “The double granting of mining rights and mining permits is a problem. Sometimes the process, from applying for a permit to a point where you can be granted a permit, takes years. Outside the DMRE I feel the departments are not working in a co-ordinated fashion.”
Nevertheless, some projects are proceeding.
Gold Fields said the 50MW renewable energy project at its South Deep mine is in the final stages of construction and will most likely be ready to commission in the third quarter of this year.
Sven Lunsche, Gold Fields' vice-president for corporate affairs, said that since the company is building the project on South Deep property the process did require some environmental approvals, but these were not too onerous and the regulatory process through the National Energy Regulator of SA was relatively smooth.
However, the project has not been without frustration. “From 2017 to 2019 we had no clarity on energy regulations. The project was going to be built by an independent power producer, and that was an additional complication,” said Lunsche.
Lunsche said it became a lot easier when the company decided to build the solar plant itself.
Hethen Hira, Pan African Resources' head of investment relations, said the only delays experienced at the group's Evander plant were during construction and in the commissioning process.
“Many of the solar panels were delayed at the harbours late last year as a result of the well-documented cyber issues at the major shipping ports, while the slight delays in commissioning can be attributed to project-specific challenges as this is one of the first large-scale solar facilities to be brought online in the South African mining industry.”
Harmony said it had experienced no delays on the environmental authorisations for Phase 1 of its solar energy project, in which it will generate 30MW once completed.
Anglo American this month announced plans to install 3GW-5GW of renewable electricity in SA over the next decade.
The shocks of load-shedding, which began in 2007/8, and double-digit tariff increases since then have contributed to a deterioration in fixed investment in new mines since 2011.
According to Minerals Council chief economist Henk Langenhoven, the gross fixed capital formation for mining in 2021 was R114bn.
“This is the scary part; net investment is declining, so not even [keeping] pace with depreciation/wear and tear,” he said, referring to the construction of new mines as well as investments in plant and machinery.
Some mining companies are, however, extending the lives of their operations given buoyant metal prices that have resulted in superprofits.
On Friday, Vedanta Zinc International said it had approved a R7bn expansion of the Gamsberg Mine to double up its production capacity in the Northern Cape,. The group said with this expansion, Vedanta Zinc International South Africa, will become Africa’s largest zinc producer.
Impala Platinum (Implats) committed R8bn to extend the life of mines in its South African mining operations over the next few years, and Thungela Resources said it plans to invest R1.9bn in production replacement at its Elders mine and another R2.2bn in extending the life of its Zibulo North project by 10 years.
A year ago Kumba Iron Ore approved the R3.6bn extension of its Sishen mine, and Anglo American Platinum announced the R3.9bn Mototolo life-extension project last year.
Implats group executive for corporate affairs Johan Theron said the record metal prices are a tailwind for the group.
“Implats is assisted by the commodity boom but also improved prospects with an emerging hydrogen economy lifting future platinum group metals demand fundamentals,” he said.
However, Theron said problems in mining include policy uncertainty, power security and the challenging socioeconomic conditions in many operating areas affecting service delivery and the lived experience of workers and the community in general.
“Despite the well-documented challenges, [mining in SA] still provides compelling investment prospects based on a risk-reward basis, specifically based on a shared commitment of all the social partners to work together in resolving these challenges,” he said.
But Sibanye-Stillwater's executive vice-president for investor relations and corporate affairs, James Wellsted, said the industry is not conducive to significant investment because of various factors, mainly issues involving state-owned entities.
“You cannot rely on Eskom for a consistent energy supply. You do not know what costs they are going to be increasing or applying for every year,” he said.
Sibanye-Stillwater’s gold employees have been on a wage strike since March 9.
“We have social unrest and community issues, we have the procurement mafia. All of those factors are negative for investment,” Wellsted 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.