Mineral Resources and Energy Minister Gwede Mantashe said on Monday the 2022 was a difficult year for the World, and Africa in particular. It was a year in which international and domestic factors negatively affected mining production, and mineral sales.
Speaking at the Investing in African Mining Indaba in Cape Town on Monday, Mantashe said international factors included soaring energy prices due to the ongoing geopolitical dynamics, whereas domestic factors included the ongoing power supply disruptions (load shedding) and the logistical bottlenecks on the country’s railways and ports.
“Soaring global energy prices negatively impacted the industry’s operational costs. For instance, the price of crude oil averaged $100 (R1 729) per barrel in 2022, and as a result mining companies had to pay exorbitant prices for fuel and electricity,” he said.
South Africa experienced more power supply disruptions in 2022. This, Mantashe said, had led to a decline in mineral production across all commodities.
It is estimated load shedding costs the economy about R1 billion a day. In November, 2022 mining production contracted by 9%, marking a 10th consecutive month of contraction in volumes produced.
“However, in the same period, Gold Fields – a mining company operating in South Africa – increased production by 10%. It is our considered view that Gold Field’s performance was in part because of the reforms on embedded generation which they took advantage of following the amendments to Schedule 2 of the Electricity Regulation Act (ERA) wherein the licensing requirement for generation projects for own use was increased from 1MW to 100MW, and ultimately removed altogether,” Mantashe said.
He said this cushioned them from the impact of load shedding as they were able to generate their own energy, and thus increased and maintained production.
Mantashe said the mining industry relies heavily on efficient railways and ports for their export logistics.
“Therefore, the logistical bottlenecks on the railways and ports continue to contribute to the decline in export volumes of bulk commodities such as coal, iron ore, manganese, and chrome. As a result, the country is not fully benefiting from the commodity boom of these minerals,” he said.
According to Mantashe, it was, therefore, urgent for the country to normalise freight operations. Hence, Transnet is seized with efforts to accelerate the improvement of its rail network to support the return to service of locomotives to enable the export of bulk commodities.
“We further welcome the establishment of joint structures by Transnet and the Minerals Council South Africa (MCSA) to ensure that all possible actions are taken speedily to stabilise and improve South Africa’s operation efficiencies at the ports. We believe this kind of co-operation between Transnet and the industry will bear fruits like we saw at the height of the Covid-19 pandemic,” he said.
Meanwhile, Herbert Smith Freehills partner and Africa chairperson Peter Leon said it was time to split the Departments of Minerals and Energy and reverse the mistaken merger.
“Mantashe made all the right noises in his address to the 2023 Africa Mining Indaba this morning, but once again failed to offer any concrete solutions to the significant challenges facing South Africa’s mining sector, including the lack of energy availability (now at 49%); improve the licensing bottlenecks at the Department of Minerals and Energy; and addressing the ongoing crisis at Transnet freight rail.
“A year ago, he promised that a functioning online mining cadastre was the ministry’s top priority. But nothing has happened in the past 12 months, and today the minister didn’t even mention it,” he said.
Leon said it was now time for President Cyril Ramaphosa to step in and reverse the decision to merge the Ministries of Minerals and Energy and appoint a new energy minister who can fast-track the changes needed to ensure that South Africa’s energy sector can receive the urgent attention it deserves, as well as take advantage of the many opportunities offered by Africa and South Africa’s pivotal role in the green energy transition.
“Merging the ministries in 2019 was a strategic mistake, which needs to be addressed urgently given the ongoing Eskom crisis and its impact on mining production, mineral exports and the country’s current account,” he warned.
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