Identifying weaknesses Electricity tariffs and supply Electricity tariff increases since the onset of the power crisis in 2008 have been significantly above inflation levels, with a doubling in real prices from 2008 to 2012 and a further increase of 25% above inflation from 2012 to 2016 (Minnaar, 2021). Power utility Eskom argues that the pricing regime does not meet the requirements for cost-effectivity at an efficient operational level, but customers are concerned about affordability in relation to other countries. Above-inflation tariff increases have a substantial impact on the mining industry’s cost structure, jeopardising the viability of marginal and lossmaking mines and threatening to accelerate job losses at energy-intensive mines. In 2021, mining input cost inflation averaged 8.80%, but this will increase to 13.30% should Eskom’s latest requested tariff increases for 2022/23 to 2024/25 be approved (Langenhoven, 2022). The Minerals Council argues that the mining sector is a price taker and cannot influence selling prices. Therefore, cost increases erode profit margins and jeopardise the sustainability of the sector. The mining industry has also called for a more predictable price path for electricity. While Eskom will continue to supply the bulk of the mining sector’s power needs for some time, Minerals Council member companies have announced a pipeline of 3 900 MW of potential renewable-energy projects worth more than R60-billion that would, when implemented, substantially contribute to bridging the large country electricity supply deficit, diversify the country’s supply, reduce the sector’s carbon footprint
“. . . the mining sector is a price taker and cannot influence selling prices. Therefore, cost increases erode profit margins and jeopardise the sustainability of the sector.”
and stabilise costs (Mining Weekly, 2021).
Infrastructure shortcomings The mining industry has singled out logistics as one of its biggest domestic constraints, particularly for
those companies producing bulk commodities, like iron-ore, coal, chrome and manganese. These firms have been unable to benefit from higher global commodity prices, in some instances record prices, because of rail and port inefficiencies. State-owned Transnet’s rail system faces major impediments stemming from high levels of theft and vandalism, among other operational challenges. The parastatal loses about 120 km of overhead cables a month, owing to criminality. Security incidents across the freight rail network have increased 177% in the past five years and the cost to Transnet and its customers has increased exponentially (Transnet, 2021).
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