Direct relation between load-shedding and mining production

Minerals Council SA chief economist Hugo Pienaar said Eskom’s load-shedding and load-curtailment have severely undermined real mining production in South Africa.

Pienaar said that in November 2023, the level of real mining output in the country was still almost 4% below its pre-Covid level in December 2019.

He shared a graph that revealed the close correlation between the country’s electricity production and mining production.

While Eskom’s failure to supply sufficient electricity consistently is not the only factor weighing on the sector, the link between higher stages of load-shedding and lower mining output has been well-documented.

South Africa’s mining industry is of critical importance to the economy, as it is a major employer and taxpayer – it is also one of the most energy-intensive sectors in the country.

In March 2023, Fitch published a report on the impact of load-shedding on multiple sectors in South Africa.

It revised its assessment of mineral production growth forecasts from 0% to -1% year-on-year for iron ore, and from 2% to -2% for platinum.

In 2023, the mining industry faced major job cuts and declining production, which cut into their profits and, therefore, the state’s corporate income tax revenue.

For example, Sibanye-Stillwater – South Africa’s largest employer of mineworkers – announced in October of last year that it would enter into Section 189 consultations to retrench over 4,000 workers amid the company’s restructuring.

The company said above-inflation increases in key cost components – such as electricity, water, wages, and fuel – combined with the recent decline in PGM prices have significantly impacted the global PGM industry’s profitability.

Other miners, including Glencore, Seriti and Implats, also issued section 189 notices in 2023.

The National Union of Mineworkers (NUM) said close to 10,000 jobs could be lost by January 2024 as mining companies begin to issue retrenchment notices amid declining commodity prices and an inability to export their produce. 

“Most companies have cited load-shedding and the continued increasing prices of electricity as reasons to issue Section 189A notices,” NUM said in a statement. 

“Clearly, for as long as there is still no solution to the electricity challenges, we will continue to lose jobs. We are calling on the government to proactively attend to this as a matter of urgency.”