Chamber warns government of trade-off between Eskom’s rating, jobs

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Dineo Faku

The Chamber of Mines has warned that the proposed electricity price increase by state-owned power utility Eskom would further cripple the ailing platinum and gold sectors.

The mining industry, which employs a million people, of whom half are directly employed, and contributes 8 percent of gross domestic product, is struggling with increasing cost pressures, including power and labour, that contributed to the closure of numerous shafts last year.

Yesterday the chamber, which made a representation to the National Energy Regulator of SA, called on the government to include price competitiveness and cost efficiency objectives in the “shareholder compact” with Eskom.

“The electricity price is reaching a tipping point where further excessive increases in the electricity price may result in further restructuring in the platinum and gold mining sectors,” Mark Cutifani, the president of the chamber, said in a statement yesterday.

Earlier this month, Anglo American Platinum announced that 14 000 jobs were on the line in its proposed restructuring plan, which included the idling of four shafts in Rustenburg.

Cutifani added that despite the declines in gold production and a sideways movement in platinum production, the electricity costs of the mines had increased by more than R7 billion between 2007 and 2012.

“This is based on a threefold (238 percent) increase in the electricity price in the same period. Eskom’s proposed further doubling in the price by 2017 is simply unaffordable and will prejudice the platinum and gold mining sectors.”

The mining chamber recommended that the government undertake a proper regulatory impact assessment of the costs and benefits of the proposed price increases regarding its plans to encourage greater beneficiation and a growing mining sector as stated in the Minerals Policy, the National Development Plan and the New Growth Path. This would expose the trade-offs that existed in policy and pricing decisions, it said.

“At this stage, it appears that the proposed price trajectory is too skewed in favour of Eskom’s stand-alone investment grade rating away from the need for a competitive electricity price for growth and industrialisation,” Cutifani said.

The chamber argued that the third multi-year price determination application was proposing a price path that would take the price of electricity charged to industrial customers from 61c a kilowatt-hour in 2012 to R1.24 a kilowatt-hour by 2017, which equated to a 104 percent increase or a doubling of the price.

It added that between 2007 and 2017, the price would have increased a staggering 587 percent, an almost seven-fold increase.


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