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mines will have to dig deeper

By unknown | Aug 27, 2008 | COMMENTS [ 0 ]

Kea' Modimoeng

Kea' Modimoeng

The power crisis which cost South Africa R50 billion in lost production will force the manufacturing and mining sectors to drastically cut their planned investments - putting the brakes on an already slowing economy.

The Chamber of Mines yesterday said planned investment in the mining industry over the next five years could be reduced by between R16 billion and R25 billion.

Roger Baxter, chief economist at the Chamber of Mines, told a conference on the mining and metallurgical industry's response to the power crisis yesterday that the reduction in investments would be as a consequence of the 10 percent power reduction forced on mines.

The R50 billion estimated was announced by the National Energy Regulator (Nersa) at the same conference.

Baxter said a survey of mining companies revealed that jobs were also at risk, with employment expected to drop "substantially" if the 10 percent cut in power supplies was maintained indefinitely.

The mining industry employs about one million people.

Luke Doig, economist from Credit Guarantee said: "Such huge economic effects of the electricity crisis are elevating the entire cost profile of doing business"

Asked about how he thinks the economy could recover, Doig said: "The economy will never recoup that, it's an opportunity cost and a foregone cost on taxpayers' money".

"Tax payers and general consumers will have to bear with the additional inflation pressure due to lost output in the economy."

In response to Nersa's estimation, Patrick Craven, spokesperson of Cosatu said: "From the beginning of the electricity crisis Cosatu has argued that this was going to impact negatively on the economy."


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