South Africa must urgently prioritise the resolution of challenges facing freight and railway operations if the mining industry is to capitalise on the current minerals boom, according to Mineral Resources and Energy Minister Gwede Mantashe.
Mantashe made the call on Monday during the start of the 2023 Investing in Africa Mining Indaba in Cape Town. He told the delegates that 2022 had been a grim year for the mining industry.
“It is a year in which international and domestic factors negatively affected mining production and mineral sales,” Mantashe said.
“International factors included soaring energy prices due to the ongoing geopolitical dynamics, whereas domestic factors included the ongoing power supply disruptions [loadshedding] and the logistical bottlenecks on our railways and ports.”
Mantashe said the soaring global energy prices negatively impacted the industry’s operational costs.
“For instance, the price of crude oil averaged $100 (R193.73) per barrel in 2022 and as a result, mining companies had to pay exorbitant prices for fuel and electricity.”
Domestically, the industry was hard hit by increased power outages. This, Mantashe said, led to a decline in mineral production across all commodities.
“It is estimated that loadshedding cost 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.
“That decline is manifesting itself in many ways. You find mines producing and keep stockpiles because those stockpiles cannot be moved to the ports. Those are the issues we need to confront.
“The investors, as they come here, must appreciate that we have these challenges and we have to overcome them.”
However, looking at the positives, he pointed to the success of Gold Fields, which during this period increased production by 10%. Mantashe said the gold mining company is an example of innovation and foresight that led to different outcomes compared to the rest (of the companies in the sector).
“It is our considered view that Gold Fields’ performance was in part because of the reforms on embedded generation which they took advantage of following the amendments to schedule two of the Electricity Regulation Act,” he said.
In 2022, the act was amended to allow the licensing requirement for generation projects for own use. The cap was increased from 1 megawatt to 100 megawatts and ultimately removed altogether.
“This cushioned them [Gold Fields] from the impact of loadshedding, as they were able to generate their own energy, and thus increased and maintained production.”
With the industry relying heavily on efficient transportation, Mantashe said the current logistical bottlenecks on railways and ports continue to contribute to the decline in export volumes of bulk commodities.
These include coal, iron ore, manganese, and chrome. “As a result, the country is not fully benefitting from the commodity boom of these minerals.
“Transnet is currently exploring efforts aimed at accelerating 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 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 cooperation between Transnet and the industry will bear fruits like we saw at the height of the Covid-19 pandemic.”
At the centre of the country’s current energy challenges, Mantashe said, “is the decline in the energy availability factor [EAF] from an estimated 75% to 49%”.
“Therefore, the most feasible and logical option to exercise to resolve loadshedding is by arresting the decline in the EAF,” he said.
The minister further shared that failure to attend to and address the declining Eskom plant performance and subsequent higher stages of loadshedding “is an irritation to society and has the potential of pitting society against government”.
Curbing mine deaths
In the past year, the industry, he said, made significant inroads in reducing fatalities. In 2022, it recorded 49 fatalities, which was the lowest in history. The figure represents a 34% improvement year on year, compared with 74 fatalities recorded in 2021.
Meanwhile, Mantashe told delegates that his department and the Industrial Development Corporation have created a R500-million exploration fund to help the country unleash junior miners and the emergence of new mines.
The fund will be supported with geological information to derisk the exploration activities and increase the chances of success.
“The initial phase of the implementation of this fund is deliberately kept small to prove the value of geological information to accelerate advancement along the exploration value chain trajectory to the pre-feasibility stage,” he said. – SAnews.gov.za
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