SA mining production for January 2008

The mining production numbers for January 2008 as released by Statistics South Africa this morning clearly demonstrate the significant impact that the electricity induced outages have had on the mining sector. On a year-on-year basis, the physical volume of mining production declined by 10.7% in January 2008 led by large declines in production from the large deep-level mines in the form of a 16.5% decline in gold production and a 15.9% decline in platinum group metals production. In January 2007, total mining production, on a year-on-year basis, increased by 1.7%, which illustrates the extent of the 10.7% decline recorded in January 2008. Coal production declined by 12.5% on a year-on-year basis and production of other minerals was mostly unaffected. The impact of the decline in mining production has already been felt in the export numbers with South Africa’s trade deficit rising to R10.2-billion in January.

The electricity emergency hit the mining industry hard from 25 to 31 January where most of the sector was effectively shut down. In the subsequent “Eskom Stabilisation period” the mining industry, combined with Eskom’s other large industrial customers, agreed to reduce demand by 10% to help Eskom stabilise the network. However, the consequences of the late January shutdown, plus the curtailment of electricity supply to 90% of normal demand, has had a most deleterious impact on the large deep-level mines, since the impact on production has generally been larger than the reduction in electricity supply. Following intense engagement with government and Eskom, agreement has been reached on increasing the electricity supply by 260 megawatts to the mines most affected by the electricity supply curtailment, but with a specific focus on trying to ameliorate possible retrenchments.

The Chamber, in conjunction with its members, has been actively participating in the various structures established to deal with the country’s electricity supply challenges, including the Eskom task teams, National Electricity Response Team and the Presidential Working Group. What is manifestly clear is that all electricity users have an important role to play in reducing demand to create the space for limiting disruptions to the electricity market while the supply-side build programme takes shape. But the improvement in the energy efficiency of the economy is also meant to help create the space for growth in investment over the next five years.

The Chamber will continue to work constructively towards solutions and implores other users to do the same.

MG DILIZA

CHIEF EXECUTIVE

 

For any enquiries related to this media statement please contact Roger Baxter, Chief Economist, on 011-498 7663