Mining companies in South Africa may be forced to shut down operations in the coming years if load shedding persists, says mining and labour analyst Mamokgethi Molopyane.
South Africa faces extended energy generation shortages over the next few weeks, with the national power utility Eskom implementing stage 6 load shedding on Monday.
Speaking to the SABC, Molopyane said that companies will likely be forced to restructure their operations in the coming quarters in response to the power crisis.
This will impact mineworkers and people that rely on servicing the mining industry the most, he said, adding that the expected decline in production will also lead to retrenchments.
Multinational mining company Sibanye-Stillwater said it often has to reduce its electricity demand because of load shedding, and this, in turn, affects production over time. The company has, however, put mid-term measures in place to mitigate the effects of load shedding.
James Wellsted, the executive vice president of investor relations at Sibanye-Stillwater, said that the company has agreed on protocols to implement when needed.
Wellsted said this includes plans to reduce electricity demand by between 10% and 15%, enabling the company to operate through this period. However, he warned that, over an extended period, power shortages will inevitably impact production.
He said that although Sibanye-Stillwater has signed an agreement with Eskom related to its mainline operations, the company is forced to pause other production areas as stages of load-shedding escalate.
Decrease in contributions and growth
Mining is one of the biggest contributors to South Africa’s gross domestic product, accounting for almost 9% of GDP in 2021.
In 2021 the direct contribution to GDP from the industry grew by 36% to R481 billion (2020: R353 billion), and the percentage contribution of mining to the economy improved to 8.7% from 7.1% the year before, according to the Mineral Resources Council.
According to Statistics South Africa (StatsSA), at the end of March 2022, the mining industry employed 459,000 people and marked the second most significant quarter-on-quarter increase of 2% in employment behind the business services industry.
Despite the increase in employment, the industry’s contribution to growth in South Africa’s GDP recorded a decline of 0.1 percentage points.
The mining and quarrying industry and the construction industry were the only two sectors out of South Africa’s most economically productive that showed negative growth rates over Q1/2022, with the mining sector reporting a 1.1% decrease in economic activity.
This follows the mining industry having the highest growth rate over last year (11.8%).