Minerals Council SA presiden Mxolisi Mgojo. Picture: FINANCIAL MAIL/RUSSELL ROBERTS
Minerals Council SA presiden Mxolisi Mgojo. Picture: FINANCIAL MAIL/RUSSELL ROBERTS

SA’s economy is on a cliff edge, Eskom is “in the dwang” and urgent action is needed to avert a crisis, the mining industry says.

The mining sector, with the rest of the formal economy, are in a crisis due to Eskom, the debt-laden state-owned electricity monopoly, and confidence is at “unprecedented lows”, Minerals Council SA president Mxolisi Mgojo said at the start of the Investing in African Mining Indaba in Cape Town on Monday.

“Most concerning for me is why do we need a crisis to do what is right for this country?” Mgojo asked.

Council CEO Roger Baxter said Eskom’s new CEO, André De Ruyter, has already met the council twice in the few weeks of taking up the role of heading the utility, which has R450bn in debt.

The industry can install more than 1,500MW in solar and other sources of electricity generation within 36 months, said Baxter.

One of the major impediments to the process has been Eskom, which has been reluctant for third parties to use their power lines to send power to various operations, making it prohibitively expensive.

Peter Leon, co-chair and partner at Herbert Smith Freehills has raised questions about potentially unlawful provisions of the third iteration of the Mining Charter, as well as shortcomings of the draft Upstream Petroleum Resources Development Bill. Business Day TV spoke to him for more insight.

“He has met with his biggest customers in his first week [and it] is a good effort. The indications we’ve had from Mr De Ruyter are that Eskom is willing to work with industry to allow self-generation. The reason: They’re in the dwang and they don’t have any options. They recognise we are a key part of the solution,” said Baxter.

Eskom will continue with stage 2 load-shedding for 18 months, De Ruyter has said. This means cutting 2,000MW of electricity from supply to the country, something that would be a “disaster” for SA’s mining industry, Baxter said.

The council’s data shows that mining production could fall by more than 2% in 2019 after a 1.8% drop in 2018, said council chief economist Henk Langenhoven.

The industry employed 454,861 people in 2019 compared with 456,438 the year before. In 2015, the sector employed 480,205 people.

Mining companies were unable to respond to the “violently volatile” commodity price swings during 2019, Langenhoven said.

“The worrying trend is that expansion and building of mines has declined over the past four or five years. That gives an idea of the [lack of] appetite for taking on risk and the expectation of profit in the future,” Langenhoven said.

“That will influence volumes,” he said. “It’s very concerning.”

The mining industry, the department of mineral resources & energy and the National Energy Regulator of SA have set up a working team to establish what is preventing mining companies from installing their own power generation plants, Mgojo said.

seccombea@bdfm.co.za

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