Miners welcome SA's plans to open up power generation

accreditation

South Africa's announcement that it will open up electricity generation to other players, effectively breaking Eskom's monopoly, has been welcomed by many, especially the mining industry, a key sector in Africa's most industrialised economy.

President Cyril Ramaphosa in his annual state of the nation address Thursday night outlined a raft of steps that will allow firms to generate electricity for their own use.

He admitted power cuts in recent months had had a debilitating effect on the economy and vowed to "rapidly and significantly" shore up electricity generation outside the debt-saddled Eskom.

The state-owned utility currently produces more than 90% of the country's electricity.

But it has been crippled by poorly-designed coal-fired power stations, decades of mismanagement and alleged corruption under former president Jacob Zuma. Its debts amount to R450bn.

The mining industry - one of the largest power consumers - has for years been clamouring for legislative changes to ease up licensing to let firms produce their own electricity.

Signs that the government's position on the issue was shifting came at a mining conference earlier this month where it indicated the laws would be reviewed.

The Minerals Council, an association of mining firms, said it was "encouraged by the president's commitment to rapidly and significantly increase generation capacity outside of Eskom".

"The sporadic availability of power and instability of the national grid is... one of the greatest threats to the South African economy," it said.

On one of the worst days of power cuts last December, some mining firms were forced to suspend operations for at least 24 hours after Eskom implemented severe rationing.

South Africa is the continent's largest producer of gold and the world's top platinum miner.

Eskom 'protected its monopoly' 

The Minerals Council hailed Ramaphosa's undertaking to "implement measures that will fundamentally change the trajectory of energy generation in the country."

The mining industry said it will have a combined capacity to produce 1.5 gigawatts of electricity in the next 36 months.

Companies will be able to sell any excess power into the national grid.

At the mining conference, Sibanye-Stillwater mining firm chief executive Neal Froneman told AFP that previously Eskom had made it incredibly difficult for his company to get approvals to generate its own power.

"They protected their monopoly," he said.

Anglo American's CEO, Mark Cutifani, said that allowing "companies to be flexible and ...to provide energy solutions means that we can help be part of the solution. That's really positive."

The frequent power cuts meant that mining production contracted by 1.3% in 2019 compared to the previous year, according to official figures released on Thursday.

Mining is one of the main contributors to the economy, accounting for eight percent of GDP in 2018.

The sector is also a major employer, with more than 450 000 people on the payroll, and a critical foreign exchange earner.

Fitch Ratings said that allowing power-gobblers such as mines to build their own generation capacity "could be transformative in eroding (Eskom's) monopoly."

But, Fitch cautioned in its note, "it is still unclear whether licences will be easily obtainable."

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
14.86
-0.2%
Rand - Pound
20.49
-0.2%
Rand - Euro
17.51
-0.3%
Rand - Aus dollar
10.94
-0.1%
Rand - Yen
0.13
-0.7%
Gold
1,798.77
+0.1%
Silver
25.18
-0.0%
Palladium
2,672.50
+0.4%
Platinum
1,064.50
-0.7%
Brent Crude
74.50
+0.5%
Top 40
61,269
-1.1%
All Share
67,394
-1.0%
Resource 10
69,198
-0.2%
Industrial 25
85,153
-2.4%
Financial 15
12,832
+1.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
In light of the recent looting, do you think a basic income grant is the right approach to deal with SA’s hunger and poverty problems?
Please select an option Oops! Something went wrong, please try again later.
Results
It will go a long way in helping fight the symptoms of SA’s entrenched inequality, especially for those who are starving right now
20% - 1359 votes
SA’s problems are complex, and we instead need to spend that money on building and growing our economy, which will help the country in the long run
31% - 2133 votes
All grants are a problem as they foster a reliance on handouts
49% - 3386 votes
Vote