JOHANNESBURG (miningweekly.com) – South Africa’s power utility Eskom’s planned tariff increases of at least 45% a year over the next three years, could lead to a second wave of widespread retrenchments in the country’s mining industry, trade union Solidarity warned on Friday.

“There are already indications that marginal gold producers such as DRDGold and Simmer & Jack will have to let employees go by means of Section 189 processes due to, among other things, the enormous electricity price increase to be implemented,” Solidarity spokesperson Jaco Kleynhans said.

The union highlighted in a statement that more than 34 000 mineworkers had already lost their jobs in the first wave of retrenchments as a result of the global economic crisis.

Electricity costs make up between 10% and 20% of a mine’s running costs, Solidarity noted, highlighting that while gold was currently trading at record levels in dollar terms, the production margins of gold mines were under pressure.

Meanwhile, other large gold producers, such as Harmony Gold, have also started making noises about the closing of shafts, the union added.

South Africa is the largest producer of gold and aluminium in Africa and the world’s leading producer of ferrochrome, platinum and raw material for the manufacturing of stainless steel.

“With these massive increases, a second wave of retrenchments is looming for the mining industry. For a long time mining was the cash cow carrying the economy, helping to generate tax income for the government. Now this tax stream is going to dry up. There will also be numerous job losses,” Kleynhans said.

The union said it would call on the Department of Mineral Resources’ task team into job losses, the Mining Industry Growth, Development and Employment Task Team, to meet urgently in order to investigate the situation and make recommendations.

“A large-scale electricity increase above the inflation curve will seriously affect mining and there could be a drastic levelling out. The mining producers are just beginning to recover from the credit crisis, and commodity prices have been under severe pressure. If electricity price increases are out of proportion, it could have extremely negative consequences for workers and producers,” Kleynhans warned.