Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: The supply of more water from Lesotho to Gauteng has been given a wonderful thumbs-up.
Creamer: That is wonderful news. We have been waiting for some time now, the Lesotho Highlands Development Authority (LHDA) is behind all this, of course, also working very closely with the South Africans.
This is phase two of that Lesotho Highlands Water Project (LHWP) and particularly it is the go ahead for the Polihali dam, which will be linked to the first phase Katse reservoir through a pipeline. There is a mixture of South African, French and Lesotho contractors that are going to be involved in the components of this second phase of the LHWP.
Some people say there is a delay, this should have been completed in 2020. We know we are only now going to get it in 2025. That is the case. I think these procurement delays should be ended because we can’t afford to have delays with water. You have seen what happens in Cape Town.
They thought they could delay, but have run into terrible trouble. Even with the restrictions that they impose they can’t follow those restrictions, because they become too harsh, so the restrictions don’t even work. What people are saying now is that perhaps we should be penalised for this delay.
The way they do it in Namibia is that they still have restrictions until you have got to your timeline. They don’t take away the restrictions completely, because they want you to remember that we are behind with our plans. Perhaps we should also have a system where, because we are behind they don’t lift the restrictions entirely, because people bounce back to the previous levels very quickly once the restrictions are lifted.
In the reality of it here we cannot grow. We are in a recession, but you will never be able to grow an economy without water. It is absolutely crucial and we know that they have been messing around with the procurement policies here. They must just adopt global best practice because, when it comes to water, you can’t have any shenanigans and slowdowns. You can’t try and fiddle with procurement. I think the lesson of Cape Town is very strong and we should heed it..
Kamwendo: Violent protest brought the coal line to a screeching halt this week, dealing a blow to the economy.
Creamer: This is another thing. One of the commodities that really earns us foreign exchange at the moment, in fact there is no other commodity at the moment that earns the volume of foreign exchange that coal does. It used to be gold and platinum, but those two have fallen behind, but coal still marches on as the biggest provider of foreign exchange to South Africa.
Those exports by the Richards Bay Coal Terminal (RBCT) are vital to us. Now, I think that what has happened now by these protestors is that they have put a knife to the jugular, because they have disrupted the coal line. We know that 25 trains go down there a day and those trains are more than 2km long each.
This disruption is really serious and they in KwaZulu-Natal are causing a suspension of the railing of coal down there. That will have a big impact down at RBCT. We know that this is a model public-private partnership. You have the rail, which is the State and also the port, but in between you have a private-sector coal terminal, that is one of the most efficient in the world and it relies on perpetual motion.
You must not have a slow down on all these efficiencies built around this perpetual motion. Now, these protestors have stopped this and they have got us by the jugular at the moment, dealing a blow to our economy, because we were going for a record export of coal. We were going to try and hit 77-million tons, 4.5-million tons more than last year. If you have this sort of delay the disruption for our economy can be quite serious.
We are talking about 9 000 trains a year going down there and 900 ships waiting to be filled with coal. The market for coal is quite good at the moment, other commodities the prices have fallen. This price is holding up fairly well, so it is quite a setback that these protestors have actually caused a suspension of this coal line.
Kamwendo: The high winter electricity tariff should be cut so that closed furnaces can reopen and return lost jobs.
Creamer: This is a thing that is happening now. We find that with the higher winter electricity tariffs coming in, you even find the big ferrochrome producers are giving notice saying that they are going to switch out their furnaces because the cost is so high with the winter tariffs.
We don’t only have the normal high tariff that is imposed by Eskom, but in winter they lift that, to try and stop the excessive demand. This has caused companies like Samancor, which is a big ferrochrome producer, to switch out in Witbank, Middelburg, Steelpoort, Mooinooi, being switched out.
That is a temporary switch out waiting for better economic conditions, because the prices are also not so good at the moment. You also have the ferrosilicon people, particularly the company Silicone Smelters, saying can’t they negotiate a price. They know that Eskom is sitting there with a surplus of electricity, they have got idle plant and people and Eskom has got too much electricity, let’s get rid of the red tape and negotiate a price so that they get going.
I see that the regulator is now looking at proposals for an incentive pricing to the ferrosilicon going again. This sort of model should be applied across the board. I see there is a closing date for that on July 17. It would have been great if they have done this before the winter tariffs, because I find that it is ridiculous that you have 4 000 MW of surplus power.
Then you have got furnaces that cannot afford your tariff, so they switch out. At the same time you are putting jobs at risk. Can’t they just get rid of the red tape? It seems like the regulation process is just too slow and laborious. If they could just cut that red tape they could get some of the furnaces going again provided that electricity tariff is meaningful. We know that all these furnaces were built in the days of cheap electricity.
That is why they came about, we had low cost electricity and made it very feasible with this high energy consumptions, because they do consume a lot of energy. We know that with aluminium, we have had a situation with the aluminium price is high, electricity is high and when it falls its lowered. They could do something to arrange a go ahead for some of this of idle plant and idle people.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.