It’s that time again on a Friday when AMLive presents another Update From The Coal-Face with Terence Creamer, editor of Engineering News and a contributing editor at Mining Weekly.
De Gouveia: Power-intensive companies in South Africa are beginning to openly express concern about the current tariff trajectory, which they claim could undermine existing investments and forestall yet others.
Creamer: The Energy Intensive Users Group, with includes South Africa’s largest mining and industrial business in South Africa, has done some work on what it calls South Africa’s power price path.
From this, they conclude that the country is approaching an electricity price ‘tipping point’ and that unless coordinated policy, regulatory and investment actions are taken to moderate the rate of increase, the prospects for energy-intensive business activity in South Africa will become increasingly bleak.
In addition, the increases could well undermine the current aspiration to add more value to South African-produced minerals ahead of export, which is one of the objectives of the New Growth Path.
They point out that average real prices have already more or less doubled since the crisis of 2008 from 25c/kWh to 50c/kWh.
They also calculate that if Eskom were to again raise tariffs at the rate of 25% a year, which have been approved form the period 2010 to 2013, in 2014 and 2015, the price could breach the 100 c/kWh level in the coming decade.
This level, they says is not sustainable and will lead to the closure of smelters and furnaces. They argue that the price should not rise above 80c/kWh.
The main target of the lobbying effort is arguably Nersa and the next tariff round, which is likely to be submitted for consideration by Eskom early next year for implementation on April 1, 2013.
Eskom says it will apply its mind not only to the need for healthy financial ratios, but the effect of rising prices on demand and the economy as a whole.
Nersa has said its methodology is flexible enough to cater form changed circumstances, noting that the 3x25% increases were set against the backdrop of Eskom’s financial challenges precipitated by prices that stayed too low for too long.
The EIUG says a balance must be struck between sustaining Eskom’s credit rating and ensuring power price affordability.
De Gouveia: Power prices aside, there have been some developments on the beneficiation policy front this week.
Creamer: Yes, the issue of adding value to South Africa’s minerals ahead of export has been knocking around for years if not decades.
But steadily it issue is coming to the fore as a strategic economic imperative that is supported by policy and probably future legislation.
The policy support comes from the New Growth Path and the Industrial Policy Action Plan. And, the development this week relates to the nature of the possible legislative support.
This could come from amendments to the Mineral and Petroleum Resources Development Act, or MPRDA.We don’t have full details yet, but Cabinet has already approved the minerals beneficiation framework and there will now be a process of consultation with stakeholders to firm up on this framework by November.
Special adviser to the Minister and former DG, Sandile Nogxina told Australian investors in Perth this week that the framework would outline the manner in which an orderly development of the country’s mineral value chains will occur.
He also emphasised that it would encourage the labour-absorptive industries rather than simply the capital-intensive beneficiation practices of the past.
An amendment to the MPRDA will seek to align the Act with the beneficiation strategy, including possibly creating stipulations to ensure that there is sufficient feedstock available for such activity.
But as you heard earlier, the policy and the legislative environment will only take us so far. We will also need a conducive power price environment, new skills, higher investor confidence and possibly a more competitive exchange rate to really upscale mineral beneficiation.
De Gouveia: There have also been new developments on the renewable energy front since we spoke last week.
Creamer: Last week, I told you that developers were going through tender documentation related to the first 3 725 MW of renewable energy capacity that the Department of Energy wants delivered into the grid between 2012 and 2016.
This will involve an investment of between $10-billion and $12-billion, into onshore wind, solar photovoltaic, solar concentrating power, biomass, biogas, landfill gas, small hydro and other smaller projects of less 5 MW.
And some of this investment will flow in the form of much needed foreign direct investment.
Well, this week, the Department of Energy reported that more than 400 companies had paid the R15 000 fee to receive the bidding documentation, which has been made available since August 3.
Of those, it estimates that some 270 are potential Independent Power Producer bidders, with the balance being financiers and equipment suppliers.
This has given government hope that the tender will be fully subscribed at the time of final submissions, which has been set for November 4.
Preferred bidders will then be selected and will have to enter into negotiations with Eskom for a power purchase agreement and grid connectivity.
But they will also need to meet a range of economic development stipulations relating to such things job creation, local content and community upliftment.
A financial closure deadline has also been set for the middle of next year and actual construction should follow thereafter.
De Gouveia: Terence Creamer is editor of Engineering News and a contributing editor at Mining Weekly. Martin Creamer will be back At The Coal-Face at the same time next Friday.
Edited by: Creamer Media Reporter
Comment Guidelines (150 word limit)
Environmental Affairs Minister Edna Molewa
Cabinet has extended the contract of Department of Environmental Affairs (DEA) director-general Nosipho Ngcaba and approved the appointment of Limpho Makotoko as the new DEA COO. “Under the leadership of Ngcaba, the DEA has consistently received clean and...
The Department of Trade and Industry (DTI) has invited companies to participate in a trade and investment mission to Ghana and Nigeria from August 8 to 12. Companies in the agriculture and agroprocessing sectors, built environment professionals, automotive and...
Cabinet has approved the Industrial Policy Action Plan (Ipap) 2016/17 to 2018/19, which seeks to achieve a higher-impact industrial policy in difficult economic circumstances, including the difficulties faced by the domestic steel industry and the drought which has...
Recent Research Reports
Automotive 2016: A review of South Africa's automotive sector (PDF Report)
Creamer Media’s Automotive 2016 Report provides an overview of South Africa’s automotive industry over the past 12 months. The report provides insight into local demand and production, vehicle imports and exports, investment and competitiveness in the sector, as well...
Energy Roundup – April 2016 (PDF Report)
The April 2016 roundup covers activities across South Africa for March 2016 and includes details of a North Gauteng High Court Judge’s dismissal of a court application to postpone the 9.4% electricity tariff increase, which the National Energy Regulator of South...
Electricity 2016: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2016 report provides an overview of South Africa’s electricity sector, focusing on State-owned power utility Eskom and independent power producers, electricity planning, transmission, distribution and the theft thereof, besides other issues.
Energy Roundup – March 2016 (PDF Report)
The March 2016 roundup covers activities across South Africa for February 2016 and includes details of the Department of Energy’s plans to announce the preferred bidders for the first tranche of the coal independent power producer procurement programme; the Council...
Steel 2016: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2016 Report examines South Africa’s steel industry over the past 12 months. The report provides insight into the global steel market and and particularly into South South Africa’s steel sector, including production and consumption, main...
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
This Week's Magazine
The two spent-fuel pools at Eskom’s 1 800 MW Koeberg nuclear power station, in the Western Cape, will be full by 2018, increasing the urgency on the State-owned utility to begin pursuing alternative storage options. Koeberg has, over the past 32 years, accumulated a...
South Africa lacks the skills necessary to implement the government’s plan to build 9.6 GWe of new nuclear energy capacity, warns nuclear-qualified Quality Strategies International CEO David Crawford. “Apart from the concern about the affordability of the programme,...
The 700-series devices provide network security monitoring, app control, URL filtering, VPN security, antivirus, antispam, antibot, and advanced intrusion prevention and detection functionality
Cybersecurity multinational Check Point has released its latest 700-series cybersecurity systems for small businesses, which draw on its international threat intelligence to provide up-to-date cybersecurity, says Check Point South Africa country manager Doros...
Daimler Trucks and Buses Southern Africa (DTBSA) saw a marked slip in new-vehicle sales in 2015 compared with 2014, with sales dropping from 5 897 units to 5 300 units. The decline came as the South African new truck and bus market declined from 31 558 units in 2014...
Group of 20 (G-20) economies threatened to penalise havens that don’t share information on their banking clients after the leak of the Panama Papers provoked a global uproar over tax evasion. The G-20 will consider “defensive measures” against financial centers and...