JOHANNESBURG (miningweekly.com) - The Chamber of Mines (CoM) of is querying why South Africa’s mines are continuing to be “penalised” with a lower power allocation and says something must be done to end the period of power curtailment.

“One has to ask the question why the mining sector is being kept to a 90% electricity supply,” says CoM CE Zoli Diliza.

Since the beginning of February, the South African mining sector has been forced to make do with 10% less electricity.

“A high level of political, labour and business leadership is actively involved, but the mining sector continues to be penalised,” Diliza says.

Power curtailment to mines is particularly significant, he says, in the light of South Africa’s 8% current-account deficit, against the ability of the mining sector to narrow that deficit through exports.

He says that, although the CoM has participated in all the structures established to deal with the power crisis, the problem has “not yet gone away”, and something needs to be done to end it.

On a net basis, he says that the mining industry earns more foreign currency than any other sector of the South African economy.

South Africa’s large import-dependent manufacturing sector, he adds, cannot survive without access to the foreign currency that the mining sector earns.

When, between January 25 and January 31, power curbs forced the mining industry to operate at 50% of its normal electricity requirements, mining equities on the JSE declined by R85-billion.

An additional damaging outcome of the power supply crisis was a 25% drop in mining gross domestic product, which effectively halved the country’s economic growth rate from 5% in the fourth quarter of 2007 to 2,1% in the first quarter of 2008.

Diliza reveals that the mining industry and intensive energy users are debating a cogeneration mechanism, but “there is something odd in the sense that Eskom is both a player and a referee”.

If independent power producers are to be encouraged, it has to make investment sense, and government and the National Energy Regulator will have to play a role in setting the prices at which cogenerators sell power to Eskom, as “Eskom cannot be an operator and, at the same time, be a referee”, he insists.

Last year, Diliza adds, the South African mining and minerals sector accounted for merchandised exports worth R270-billion, and he calculates that ten-million South Africans would lose their daily subsistence without mining.

Diliza says, in answer to mining critics, that, without mining, the South African economy would shrink by one-fifth, the JSE would lose one-third of its value, and the country would lose more than half of its total merchandised exports.

South Africa would also be plunged into darkness, as 95% of Eskom’s primary energy comes from coal that the mining industry produces, as does 30% of its transport fuel.

In the global context, the South African mining sector is the world’s biggest producer of alumina silicates, chrome, ferrochrome, manganese, platinum group metals, vanadium and vermiculite.

It is the world’s second-largest supplier of zirconium, the third-largest supplier of antimony, the fourth-largest supplier of ferromanganese, the fifth-largest supplier of coal and the eighth-largest supplier of iron-ore.

The “emphatically robust” mining industry is thus “critical to socioeconomic development” and deserves support.