Minerals Council calls for rational debates on a just transition

9th October 2019 By: Kim Cloete - Creamer Media Correspondent

Minerals Council calls for rational debates on a just transition

Minerals Council chief economist Henk Langenhoven
Photo by: Creamer Media

CAPE TOWN (miningweekly.com) – The Minerals Council South Africa has called for "rational and sombre" debates about a just transition from coal-fired power to more wind and solar energy and has outlined the difficult situation mining companies are facing, amid higher electricity prices and other input costs.

The council's chief economist, Henk Langenhoven, has called for more clarity about statistics in areas such as Mpumalanga, where the coal industry will be severely affected by the decommissioning of several Eskom coal-fired power stations.

“There is virtually no proper quantitative analysis of how many people are going to be unemployed if we are going to close the coal mines,” he told Africa’s wind energy conference, the Windaba, in Cape Town, on Wednesday.

He said he was concerned about "unrealistic opinion pieces and debates about getting rid of coal" in favour of green technologies.

The annual wind energy summit has brought together more than 600 people and this year has organised a special session on renewable energy’s contribution to South Africa’s mining sector.

Langenhoven relayed the challenges facing the mining sector, saying the government’s input costs were increasing at a much faster pace than those in the private sector, and that the mining industry was being hit hard.

Electricity costs, in particular, were taking their toll. He said electricity costs made up more than 23% of the total costs in the gold industry and close to 11% for iron-ore.

“Government’s input costs are increasing a lot faster than the private sector, so we have to pay more. We are exposed more than other sectors. It is a drag on productivity.”

He said 45% of the mining sector’s intermediary input costs – around R100-billion – emanated from government.

“We have no control over this and are exposed to the inefficiencies and corruption of State-owned enterprises,” said Langenhoven.

He said the coal sector had been squeezed by the recent drop in global coal prices and was now being asked by Mineral Resources and Energy Minister Gwede Mantashe to drop coal prices to help save Eskom.

“Coal prices dropped by 40%, from $100/t to $60/t. Imagine what this does to the R73-billion export component, and the Minister wants us to drop domestic prices.”

About 50% of South Africa’s coal is exported, making the coal sector the biggest exporter in mining.

He said the mining sector’s input side was "struggling with instability" while its output side was also in difficulty. Rising costs and lower commodity prices had a double impact.

“Sixty-six per cent of gold and platinum mines are unsustainable. Around 48 000 employees may possibly be jobless. A lot of mines are marginal.”

Langenhoven said it was important to boost the investor climate, but this was a challenge in unpredictable times.

Corruption was an impediment to investment, while costs that business needed to pay, such as electricity, water, data, transport and costs at ports, all needed greater certainty for business to invest. 

Langenhoven said the mining industry’s exports amounted to about R280-billion, while about R153-billion of product was sold domestically.