Everyone needs to muck in on energy, Eskom won’t do it alone

Electricity pylons. (Nardus Engelbrecht, Sapa)
Electricity pylons. (Nardus Engelbrecht, Sapa)

After the South African Chamber of Mines came out in strong support of some of the mining and power aspects covered in Thursday’s State of the Nation Address, President of the Chamber of Mines, Mike Teke, joined Alec in the CNBC studios to discuss their plan to work on growing investment in the mining sector after a successful Mining Indaba last week. 

What was your feeling on the Indaba?

Obviously, it’s big networking and huge opportunities.  Quite a number of people go there, thinking that they will pick up in terms of opportunities when it comes to investments.  Beyond that, what are the messages in the mining industry, especially globally?

There was proper money there as well, this year.

There was proper money.  It’s about how you identify that proper money.  The most important thing is the messages that come out of the Indaba.

What were those messages?

We’ve seen most of the people showcasing their projects, especially what is happening in Africa.  I spoke about the African Mining Minister’s symposium on Sunday.  That becomes important for us and we’d like that to be stronger.  Why?  We’re starting to showcase what Africa can offer.  Globally, you see many players especially from the East, such as China and Japan who are keen to get into the mining industry.  I’m not only talking about mining, but beyond mining as well.  Energy is a big thing in our lives, too.

Smart money.  I found that the sense was that the clever money is coming. Now, its people who actually put their hands in their pockets.

They’re saying ‘we’ll put in our money. We’ll create value for us, and we’ll work together’. Those are the opportunities I’m starting to see and you’re right; it’s different from the old money where many people might say ‘we may give you money, but we will make noise on the sidelines’. Capital is like that. When they give you capital, they dictate how they want it to be returned and how you work with it.
They like certainty, long-term. The one little niggle was with South Africa’s BEE.  As a Chamber, are you able to make any progress on that front?

We are currently in discussion with the Department of Mineral Resources, where they are looking at a scorecard since 2004, when the MPRDA was promulgated until now, to ascertain how much compliance and transactions we’ve seen.  I’m confident that great transactions have been done.  Is there more room for improvement?  Yes, there is.  If there are new companies starting to empower, we would like them to be robust in their structures and put something together, which is long-term and sustainable.

That’s a good point. A little bit like the property in the State of the Nation Address where the President said ‘it’s in the future.  It’s not people who’ve already been affected’ and I guess that these are the nuances, which are lost there.  What did you think of the State of the Nation Address (the drama aside)?

Drama aside: I went in, thinking in a biased manner. Why?  I was thinking about energy. I was asking myself whether we could get to grips with the situation, which we’re facing in South Africa. Five or ten years ago, I never thought that we would find ourselves in this situation. I believe that as a country, all the sectors of this economy, including Government, needs to deal with the energy situation. Then there were the nine points, which the President touched on. The first one was the issue of the energy crisis that we’re facing.  We need to come to terms with the fact that Eskom is not going to do it alone. Government must come to the party and we have to ensure that we support Government, but that enabling environment has to prevail now.

The Chairperson of NERSA and regulator Jacob Modise was in studio earlier, who says he feels that the prices are now at a level where independent producers will, in fact come to South Africa. Of course, in the past, they couldn’t compete with Eskom but now he thinks that it is a possibility. Do you share that view?

My view is that if NERSA facilitates and they come to terms with the fact that the pricing model is well understood by everybody, there’s a huge opportunity for IPP’s. I’m keen on us coming to the party. There are many opportunities in the Mpumalanga area.  The existing mining houses are keen to participate and if you go beyond, Waterberg has lots of coal. Beyond coal, we have other energy mixes that we can talk about, such as hydro. We’re talking about renewables etcetera, but the IPP time is here now.

Mike, from a broader perspective, the President visited Malaysia.  He learned about these labs.  He’s now approaching them – putting them into South Africa.  There is a mining lab.

We at the Chamber are encouraged that the mining lab is being set up.  We know that they started with the ocean economy/maritime setup.  Now, on the mining side, the Government is saying ‘we need to start the mining lab’.  We are active participants in that and we believe that hopefully, we’ll stop talking and start delivering.

That’s exciting.  When might that be triggered?

Well, the discussions have started.  The teams are working and our Chief Operating Officer, Roger Baxter participates in one of the mining labs.  I’m hoping that the results will be good.

Mike Teke is the President of the Chamber of Mines.  So it’s not all gloom and doom. Looking at things from a more lateral perspective, one can see that progress is being made.  It just appears as though the headlines are being grabbed elsewhere. 

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