South Africa’s Mineral Resources and Energy Minister, Gwede Mantashe, said South Africa’s mining industry is not an industry in crisis albeit its challenges, and implored producers of coal to invest in clean coal technologies.
Speaking at the 2019 Joburg Indaba, in Sandton, he explained that the mining sector was a critical part of South Africa’s economy.
“If one commodity is in trouble, this doesn’t mean mining is in trouble. Other minerals are growing, including platinum group metals, coal and manganese. Owing to the dominance of the gold miners, and its challenges – this does not mean that the mining industry as a whole is in trouble.”
Despite a negative first quarter growth, where the economy contracted by 3.2%, the mining industry became the strongest performer in the second quarter growth recovery of 3.1%.
Contrary to the 10.8% decline in the first quarter – contributing 0.8% to the overall first quarter decline – mining expanded by 14.4% in the second quarter, contributing 1% point to the GDP. Main contributors to this growth in mining included iron ore, manganese and coal. Load shedding, electricity pricing and a five months protracted strike in the gold sector accounted for the first quarter decline.
Further, the department said in a statement that South Africa’s attractiveness as an investment destination was reaffirmed with the announcement of a R4 billion copper-zinc project by Orion Minerals in the Northern Cape. The Minister said that the revival of copper and nickel mining in the country provided a good replacement for the depleting and declining minerals which have been mined for over 130 years.
There are currently over 60 projects in the pipeline with an estimated investment value of over US $7.8 billion and projected employment opportunities estimated at 30 000 in the medium to long term, the department said in a media statement. “These are projects in exploration, expansion, new mines and processing plants. This is encouraging for the industry”.
Coal remains the ‘biggest revenue earner’
He said despite the coal sector being on the ‘back foot’, it remained the biggest revenue earner in the economy with regard to mining. “Coal won’t disappear. Let’s give it a life of 20-30 years; and agree that miners must invest in technologies to make the energy cleaner so it will be around forever.”
Mantashe alluded to being called a ‘coal fundamentalist’ but said his sentiment on the sector had nothing to do with being a coal fundamentalist.
“In the IRP that was released to cabinet, it makes provision for coal with the understanding of investment in clean coal technologies. And we have also made provision for nuclear, which is very much hated by many. And, yet today, the Koeberg power station is the most reliable, most efficient and the most cost-effective supplier of electricity in South Africa. To write it off is a mistake.
“We have made a provision for gas and it will be game changer for South Africa. We have also made provision for renewable energy and it must compete and grow in the market. However, we must avoid projecting renewables as an enemy of every other energy source except itself. We are not coal fundamentalists, but we are fundamentalists about security of energy supply in South Africa and that is what we are concerned about.”
He added that the department was fully committed to meeting its commitments on climate change. “Therefore, clean coal technologies are the way to go. If you don’t do it, you are going to be sterilized prematurely. We must be systematic in moving away from polluting the environment and move to using clean energy.”
Reliable electricity supply imperative
Mantashe said that load shedding and electricity pricing remained significant challenges. Reliable and secure supply of energy for the growth of the sector remains imperative. It is for this reason, he said, that government has started engagements with coal producers and independent power producers to discuss the state of the economy and the role of electricity in contributing to economic growth.
“Government is tasked with ensuring that the country has reliable and affordable supply of electricity. In this regard, we must make Eskom efficient and dependable, as we allow for greater participation of all available energy sources into the sector. We must also address the high cost of electricity on end users, including intensive energy users and households.”
He urged for a discussion amongst coal producers about the pricing of coal to Eskom. “You might say this is collusion and we are saying it is not collusion. We do not want to talk about coal production, but the impact of the price of electricity to the economy. As coal producers, and as the suppliers of the primary fuel, we must contribute to ensuring that this is actually addressed.
“We have met owners of companies in the renewable energy space and we have said to them that while they have pricied at R2.74 in Window 1, the reality of the matter is that from Window 1, one is purchasing a unit at R4.25 today. And that’s not sustainable for an Eskom that is in trouble.
“Let’s have a discussion not because we want to dictate terms, but to ensure there is affordable electricity. And, the next leg is to talk about administrative prices; followed by reducing electricity to intensive electricity users, that is your mining, manufacturing and other sectors that fall within this category.”
Mantashe reiterated that the discussions were not focused on reducing prices but how industry could re-ignite the South African economy. “Let’s talk to producers, NERSA and Eskom about price reduction. The price of electricity will not stop the flow of manganese and chrome to Asia for beneficiation. Even if we introduce a tariff or taxes on producers, they will pay the tariff if its less than the electricity price and they will still export. And that means we are exporting jobs as well.”
He added that it was the responsibility of the sector and all its stakeholders to make mining work. “We must make our economy work, simple! Our responsibility is to make sure mining is consistent in its performance.”