Escalating power costs a major challenge to mining industry

Electricity supply remains one of the major challenges facing the mining industry – not just in South Africa, but also in Africa. “Most of sub Saharan Africa cannot guarantee adequate electricity supply to the mining industry,” says Frost & Sullivan mining analyst Wonder Nyanjowa. Electricity remains an important input for all forms of mining. A major energy source for the transport of personnel, material and ore, as well as for production machines and mineral processing. Load shedding and blackouts continue to have a negative effect on the industry across the continent. According to the South African Chamber of Mines, Eskom and the mining industry in South Africa specifically have developed a thorough understanding of each other’s needs and concerns that resulted in several formal agreements, negotiated through the Chamber. But with electricity increases continuing, the Chamber has in recent months become outspoken in its criticism of the power utility, warning that further electricity increases could have dire results. “It is imperative that the South African mining industry has access to an effective and reliable electricity supply,” said Chamber of Mines CEO Zoli Diliza shortly after the Chamber called for a new electricity dispensation for the country in November 2009, preferring to now work directly with the government and bypass the power parastatal. Experts have agreed that Eskom’s proposed tariff increases of some 35% per year for the next three years, revised from the initial 45% request to the National Electricity Regulator of South Africa (Nersa), remain extremely high. “The challenge for the mining sector is that we have a basket of goods and services whose costs are rising at double digit figures in an environment of low commodity prices. This means that a number of mining companies are battling for survival and extra costs add to the burden of the pressures they face in the short term,” said the Chamber.