COLUMN EQUIPMENT
FINANCE & LEGAL COVER STORY
UNSTABLE ELECTRICITY SUPPLY
AND ITS IMPACT ON MINING AND THE ECONOMY
© ISTOCK – zha zhengzaishuru ojiankang
14
SA MINING
MARCH / APRIL 2022
www.samining.co.za
The views expressed are the author’s own and do not necessarily reflect SA Mining’s editorial policy.
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electricity crisis with the nation’s energy security, he frequency of power outages, due to climate change, inclusive and sustainable unstable electricity, creates downward economic growth and development challenges. In a pressure on productivity, labour output way the electricity issue is a multifaceted crisis that and the performance of mining and other touches every aspect of society, including the lives key sectors. Beyond disruptions in the of everyone. Here I will attend to the far-reaching broader economy, the lack of stable power leads impact the lack of stable electricity has on the to adverse economic consequences for companies, country’s social, economic and political stability. workers, consumers and ordinary people. These Undoubtedly one of the most significant direct can be measured in loss of income, increased costs and indirect effects of power outages on workers, and destruction of livelihoods. companies, livelihoods and people is not just South Africa presently experiences electricity the productivity of those affected, but also the supply instability and load shedding. The frequency economy’s performance. of power outages indicates the ongoing crisis at For example, the extent of load shedding and the state-owned enterprise Eskom, especially its frequency comes with disruption costs and its electricity generation capacity, due to Mamokgethi declining performance in critical sectors such as maintenance-related problems at its power plants. Molopyane manufacturing and mining. In the past decade, In the absence of stable electricity, the country Labour and mining analyst capital expenditure on resources for alternatives remains vulnerable to poor economic activity such as generators has increased. and recovery. Additionally, where energy policy remains a murky However, even with such an investment, blackouts and load and unclear terrain, the overall economic wellbeing of South Africa shedding have had a negative financial implication on companies is unlikely to be good. Without a systematic change in energy and indirectly too. They lead to a reduction in produced goods, decrease electricity policies and politics, Eskom’s failings pose an energy in sales, low labour productivity and idle machinery (both can have security challenge to the country. Furthermore, this crisis and the a cost-adding outcome), loss of data, and damages to hardware and COVID-19 pandemic demonstrate that now is the time to redefine and machinery. rework the country’s entire energy policy regime. The last mentioned is a consequence of the frequency of power Addressing the electricity shortage, while setting South Africa more outages that eventually cause machines to deteriorate and break firmly on the path towards a just transition for an environmentally down. sustainable economy, will be one of the defining challenges and Implications include the fall in consumer confidence and the features of President Cyril Ramaphosa’s administration. The challenge inability of companies to meet is even more significant when their targets. In mining, unstable policies have to strike a balance electricity could lead to a company between responding to the being perceived as incapable of increasing impact of climate meeting its production target, and change and delivering the being viewed as unreliable, leading obligations of a state that deems to fewer sales. itself to be developmental in its We have already witnessed stance and objectives. some of the effects of a lack of Balancing the two stable electricity. It has led to undertakings will determine the reduced demand that induces a failure or success of the energy decrease in sales, productivity, policy. Of course, all will depend performance and total output – as on its implementation. illustrated by a 0.3% fall in annual mining output between 2016 and One of the indications of how things are changing is the 2021. establishment of the Presidential Climate Commission (PCC) to And then, and as a consequence, the decline leads to a fall facilitate a just and equitable transition towards a low-emission and in company and industry competitiveness at a domestic and climate-resilient South African economy. To achieve this, a shift away international market level. Even with a boom in 2021 that saw 39.1% from the current reliance on fossil fuel (coal) for electricity generation minerals sales (compared to 2020), reinvestment of those returns in must occur. This is an unenviable process for the PCC, Mineral new exploration projects in South Africa is less than 1% of the total Resources and Energy Ministry, and the government, since they will global expenditure. Ultimately, as has been evident throughout the have to explain and even justify this in terms of its potential impact on years, mining’s overall contribution to GDP has declined relative to coal mining companies, workers and livelihoods. other sectors. SIGNIFICANT IMPACT Taken together, these significant adverse effects of load shedding, We know that the country’s current and dominant mode of electricity due to unstable electricity supply, are indicative of poor planning, generation is coal, emitting the highest carbon dioxide content of the ailing infrastructure and unresponsive political leadership to the crisis. various fossil fuels. The overly high reliance on coal as the baseload They also reveal the severe implications of unstable electricity on the source for power generation means the country’s energy policy has to performance of companies and industries like mining and the overall address delinking from fossil fuel in the long term, and simultaneously economy. respond to exogenous factors such as binding agreements of reducing In short, a South Africa that could be advancing through economic greenhouse gas emissions as per South Africa’s commitment to the growth is falling behind other developing economies, due to the Paris Climate Accord. unreliability of power supply, resulting from poor energy policies and At a glance, the above demonstrates the intersection of the lack of reforms relating to electricity-generating infrastructure. ■
