Loadshedding has had a significant impact on the South African mining sector. The PwC report ‘SA Mine 2022’ painted a picture of intense economic and structural complexity which was offset by a remarkable overall performance by the sector despite the challenges.
More hours in the dark than with power has meant that the sector has had to put extreme alternative power measures in place but, as the problem with loadshedding intensifies, so does its impact.
Statistics South Africa found that mining output has decreased by 2.6% in March 2023 as compared with 2022 and the consistent decline in overall infrastructure stability – across both the electrical grid and other factors such as Transnet – has seen the sector lose R150 billion in export value over the past year.
Loadshedding Impact of Profitability
The sector is boldly navigating these challenges with ingenuity and investment, but the fact remains that the continued loadshedding is eating away at the edges of profitability and the overall economy.
Where other countries are slowly regaining their footing after the pandemic – an event that shook up the very foundations of the global economy and business – South Africa’s economy and industries continue to be impacted by loadshedding and the limitations it imposes.
247 Long Days of Uninterrupted Loadshedding
In 2023, there has been only one day of suspended loadshedding a total of 247 days by the beginning of September. This is compared with 205 days in total in 2022. The stages have also increased significantly from most stages sitting at two or three in 2022 while the majority are four and above in 2023.
This triggered the State of Disaster announced by the President at the start of the year, a statement that has been repealed due to legal reasons but that does starkly highlight the dire situation for the country and the economy.
Gold Mining Sector on the Radar
This adds immense pressure to a sector that’s facing complexity across compliance, regulation, ESG mandates and global competition. It is also a sector that employs roughly half a million people – a critical consideration for a country already struggling with high levels of unemployment. The South African gold mining sector is particularly at risk of losing jobs thanks to loadshedding. A recent analysis in the Mail & Guardian found that job losses and early closures are likely if loadshedding remains at high levels this year.
Fifth Largest Position Mining Economy in the World
In March 2023, Fitch published a review of the impact of loadshedding across multiple sectors and revised its assessment of mineral production growth forecasts from 0% to -1% year-on-year for iron ore, and from 2% to -2% for platinum.
The mining industry dominates the headlines as it is a leading consumer of power, a leading taxpayer, and a significant provider of employment, contributing a major percentage to the country’s GDP and South Africa’s position as the fifth-largest mining economy in the world.
It needs to dominate the headlines differently for the remainder of 2023 and into 2024 as it seeks out alternative and bespoke power and transport solutions that will overcome reliance on ageing government-owned infrastructure.
Bypassing Reliance on the Grid
To overcome this challenging landscape, there needs to be key shifts across energy, regulations and government interventions as well as ongoing investment from the sector into solutions that allow for it to bypass reliance on the grid.
One of the key requirements now is for regulation that encourages private investment into renewables alongside improved procurement of additional capacity in the public sector. While some steps have been taken here, progress is slow.
Alternative Power Solutions
Aggreko has seen increased interest in bespoke power solutions that will allow mining companies to better manage their control over power while also addressing challenges around ESG obligations on a local and global scale.
The situation is pushing larger power consumers to accelerate their investments into renewable energy solutions that align with ESG objectives and will supercharge their ability to deliver on performance despite the energy crisis.
Private investment into energy solutions is having one of the greatest impacts on the current loadshedding situation and will continue to do so over the next few years as the grid endeavours to stabilise. Aggreko can provide on and off-grid solutions designed to provide cleaner mining energy that is flexible, hybrid, optimised and capable.
It is also highly customisable to suit the changing needs and expectations of the sector throughout loadshedding and can help mitigate the economic cost of the grid’s instability over both the long and the short term.
By Max Schiff – Africa Sales Manager, Aggreko