Shutdown hits gold

2008-03-13 00:00

The electricity crisis has had the devastating effect of crushing South Africa’s mining output in January 2008.

The news comes amid ongoing talk of job cuts in the mining sector, particularly from major heavyweight companies involved in gold and aluminium production in Gauteng and KZN.

Earlier this week, mining giant BHP Billiton, which runs two aluminium smelters in Richards Bay, reportedly said that it may close two potlines at its Bayside aluminium smelter to cut electricity consumption.

Statistics South Africa yesterday revealed that electricity supply shortages that led to some mine shaft closures contributed to the 10,7% drop in mining production for January 2008 compared with January 2007.

Earlier this month, government announced that mines would be able to increase their power usage to 95% in an effort to prevent the possibility of widespread job cuts.

The latest statistics cement expectations that first-quarter 2008 economic growth figures will come out significantly lower than the five percent recorded throughout 2007.

The latest figures may convince the SA Reserve Bank not to raise interest rates again, in the face of a slowing economy, Standard Bank economist Danelee van Dyk told The Witness. However, low levels of mining production have inhibited SA’s ability to cash in on the commodities boom.

A recent market rush has seen the price of gold and platinum hit record highs. While the figures are notoriously volatile given the nature of the mining business, commentators appear to be in agreement that the electricity crisis has contributed immensely towards lower output.

Van Dyk said gold production, which decreased by 16,5% year on year in January 2008, is a "sunset industry" characterised by high input costs and an over-reliance on electricity.

She said a number of areas in the mining industry are uncompetitive in the global arena.

She expressed major concern over the possibility of job cuts in the sector, given that mining indirectly constitutes 15% of the country’s economy.

Total mining production for the three months ended in January 2008 decreased by 3,9% year on year.

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