Freight bottlenecks, geopolitical conflicts hampering mining sectors

Monday, February 6, 2023

Mineral Resources and Energy Minister, Gwede Mantashe, says the country has to urgently prioritise the resolution of challenges facing freight and railways operations if the mining industry is to capitalise on the current minerals boom.

The Minister made the call while delivering the opening address at the 2023 Investing in Africa Mining Indaba in Cape Town on Monday.

Addressing delegates, he said 2022 had been a grim year for the mining industry.

“It is a year in which international and domestic factors negatively affected mining production and mineral sales.

“International factors included soaring energy prices due to the ongoing geopolitical dynamics, whereas domestic factors included the ongoing power supply disruptions (load shedding) and the logistical bottlenecks on our railways and ports.”

Mantashe said the soaring of global energy prices negatively impacted the industry’s operational costs.

“For instance, the price of crude oil averaged $100 per barrel in 2022 and as a result, mining companies had to pay exorbitant prices for fuel and electricity,” he said.

Domestically, the industry was hard hit by increased power outages.

This, Mantashe said, led to a decline in mineral production across all commodities.

“It is estimated that load shedding cost the economy about R1 billion a day. In November 2022, mining production contracted by 9%, marking a 10th consecutive month of contraction in volumes produced.

“That decline is manifesting itself in many ways. You find mines producing and keep stockpiles because those stockpiles cannot be moved to the ports. Those are the issues we need to confront. Investors, as they come here, must appreciate that we have these challenges and we have to overcome them.”

However, looking at positives, the Minister pointed to the success of Goldfields, which during this period increased production by 10%. 

He said Goldfields was an example of innovation and foresight that led to different outcomes compared to the rest. 

“It is our considered view that Gold Field’s performance was in part because of the reforms on embedded generation which they took advantage of following the amendments to Schedule 2 of the Electricity Regulation Act (ERA),” he said.

Last year, the Act was amended to allow the licensing requirement for generation projects for own use. The cap was increased from 1 megawatt to 100 megawatts, and ultimately removed altogether.

“This cushioned them [Goldfields] from the impact of load shedding, as they were able to generate their own energy, and thus increased and maintained production,” he said.

With the industry relying heavily on efficient transportation, Mantashe said the current logistical bottlenecks on railways and ports continue to contribute to the decline in export volumes of bulk commodities.

These include coal, iron ore, manganese and chrome.

“As a result, the country is not fully benefitting from the commodity boom of these minerals.

“Transnet is currently exploring efforts aimed at accelerating the improvement of its rail network to support the return to service of locomotives to enable the export of bulk commodities.

“We further welcome the establishment of joint structures by Transnet and the Minerals Council South Africa (MCSA) to ensure that all possible actions are taken speedily to stabilise and improve South Africa’s operation efficiencies at the ports.

“We believe this kind of cooperation between Transnet and the industry will bear fruits like we saw at the height of the Covid-19 pandemic,” Mantashe said.

At the centre of the country’s current energy challenges, he said, “is the decline in the Energy Availability Factor (EAF) from an estimated 75% to 49%”.

“Therefore, the most feasible and logical option to exercise to resolve load shedding is by arresting the decline in the EAF,” he said.

Mantashe said failure to attend to and address the declining Eskom plant performance and subsequent higher stages of load shedding “is an irritation to society and has the potential of pitting society against government”.

Curbing mine deaths

In the past year, the industry, he said, made significant inroads in reducing fatalities.

In 2022, the industry recorded 49 fatalities, which was the lowest ever in history.

The figure represents a 34% improvement year-on-year, compared to 74 fatalities recorded in 2021. 

Meanwhile, the Minister told delegates that the Department of Mineral Resources and Energy and the Industrial Development Corporation have created a R500 million exploration fund to help the country unleash junior miners and the emergence of new mines.

He said the fund will be supported with geological information to de-risk the exploration activities and increase the chances of success.

“The initial phase of the implementation of this fund is deliberately kept small to prove the value of geological information to accelerate advancement along the exploration value chain trajectory to pre-feasibility stage,” he said. –