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Energy hikes could damage South African mining

1 min read

Max Schwerdtfeger

The Minerals Council of South Africa has warned that increasing electricity prices would damage the country’s mining sector after the public electricity supplier Eskom unveiled plans to raise tariffs by 20.5%.

The Minerals Council said “uncertainty” surrounding electricity supply would be “hugely detrimental to investment and economic growth,” and the proposed tariff increases of 26%, 20% and 9% for the financial years of 2022/23 to 2024/25 are “simply unsustainable” for the mining industry.

Additionally, it claimed that the tariff increase could be as high as 54% depending on the phasing of the court judgment instruction the National Energy Regulator of South Africa to liquidate outstanding regulatory clearing accounts.

Henrik Langenhoven, the Chief Economist of the Minerals Council, said the increases in tariffs would be “catastrophic for the economy and the mining industry in particular, with damage coming from the impacts of electricity cost escalation.”

Eskom has said it needs to increase tariffs to raise 6.5 billion rand (US$430 million)  to cover the cost of backup generators.

Implementing Eskom’s request could severely affect the energy-intensive sectors, which account for 41% of the country’s GDP, 44% of employment and 70% of all merchandise exports, Langenhoven said.

Mining contributes 500 billion rand (US$327 billion) to the South African economy every year and accounts for 8.4% of gross domestic product (GDP).

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