African Mining Network

AMN was established to develop and build relationships across Africa’s mining community, and give the world a preview of what is happening in mining in Africa.

AMN - Private power generation a must for South Africa – comment by Yolanda Torrisi

Yol headshot May 2011

While it is good to see South Africa's government recognise that reliable and affordable power is holding back the country's economy with the mining industry one of the most affected, it is vital for the country as a whole that urgent action is taken sooner and that red tape is absolutely minimised.

During the week of the mining industry's major African mining investment showcase, Investing in African Mining Indaba, there was much discussion on the topic and the announcement by Mineral Resources and Energy Minister Gwede Mantashe that a new power generating company will be formed separately from struggling state-owned utility Eskom to boost energy security is welcomed.

However, details are still sketchy and it is difficult to see this having any real impact on power supply issues and costs for quite some time, perhaps even years.

Also of merit are plans by many mining companies to become more self-sufficient and less reliant on problematic Eskom by generating their own power from renewable sources.

For this admirable pursuit to have a beneficial impact on miners and the country as a whole, it is vital that red tape be minimised otherwise it will be more of the same for a long time.

Gold Fields has wanted to build a solar plant at its South Deep gold mine outside Johannesburg for more than three years but is still waiting for ministerial approval and a licence from the regulator to build a large generating facility.

Reuters reports that red tape has cost miners tens of millions of dollars in lost revenue over the past year, as blackouts have dented their output at a time when they could have been generating their own power.

Power outages last December prompted some mines to close with President Cyril Ramaphosa pledging to ease regulatory curbs on self-generation but what is needed now is action, not words as Eskom has warned that power cuts could continue for the next 18 months.

Gold Fields chief executive Nick Holland told Reuters: “Government must accelerate the approval of renewable power projects planned by miners so that they can deal with job-destroying tariff hikes and supply interruptions."

South Deep, one of the world's deepest gold mines, needs large amounts of power for cooling and ventilation and Gold Fields says its solar project could provide a fifth of the mine’s annual power needs for 20 years.

Andrew van Zyl, at SRK Consulting director and principal consultant Andrew van Zyl says there is no better time to consider such opportunities.

“While Eskom’s base-load supply is still vital to keep mines running, independent power generation from renewable sources holds value for a few reasons,” he said. “These relate to issues of rising electricity prices from the grid, as well as to mines’ environmental commitment and future carbon tax liabilities.”

While government recognition of the need for self-generation and its pledge to form a new power generating company are steps in the right direction, the path must be made much straighter and smoother for the plans of Gold Fields and others to be brought to fruition.

These steps are long overdue and it is impossible to reverse some of the damaging effects of the power issue, but it is vital for the future of the mining industry and the revival of the country's economy that the measures be accelerated ... without the politics.

Without freeing up miners to generate their own power, and soon, there is a risk that a large number of mining projects and expansions will not happen, to the detriment of South Africa.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent.