Electricity price hike threatens mining sector

Image: Tembisan

Above-inflation electricity price increases by state-owned power utility Eskom will see over 90,000 job losses in South Africa’s gold and platinum mine industries over the next three years.

South Africa’s National Energy Regulator said in March that Eskom could hike tariffs by 9.41 percent in 2019, 8.10 percent in 2020 and 5.2 percent in 2021 – far less than Eskom’s request for increases above 15 percent in each of the three years.

Trade unions have threatened strikes in retaliation to the planned job losses in the mining sector, as well as across various state-owned companies.

“In total, as many as 90,222 jobs would be at risk solely as a result of the MYPD4 tariff increases granted by Eskom,” the Minerals Council South Africa said in a presentation.

The industry body further added that 71 percent of all gold mines and 65 percent of platinum mines were “loss-making or marginal” by the end of 2018, adding that the power price hike would make the situation even worse.

According to data from Statistics South Africa, gold production had shrunk for the fifteenth month in a row, contracting by 22.5 percent in January, with platinum output up by 8.8 percent in the same period.

Hard-to-reach deposits, high wage settlements and uncertainty over ownership laws has resulted in the steady decline of mining operations in the country – previously the largest contributor to South Africa’s gross domestic product.

Miner Sibanye-Stillwater said in February that it planned to cut nearly 6,000 jobs in a restructuring of its gold mining operations, while one of the world’s largest gold mining firms, Gold Fields said last year it could slash 1,100 jobs, and Impala Platinum plans to cut its workforce by a third.