HomeIndustry SectorsBusiness and marketsMines have role to play in SA’s energy generation sector

Mines have role to play in SA’s energy generation sector

Minister of Mineral Resources and Energy Gwede Mantashe emphasised the role of the mining sector in the recovery and reconstruction of South Africa’s economy at the same time as giving a timeline to the shift away from coal-fired energy generation.

Mantashe explained the IRP2019 envisages that by 2030 South Africa would have moved from around 75% of coal-fired generation to less than 60%.

“Renewable energy would have increased to about 18%. It means over the next nine years there will be a gradual shift from coal-fired energy generation to clean energy a part of our just transition from high carbon emissions to low carbon emissions whilst ensuring that we don’t plunge our country into darkness,” he told online participants to the Joburg Indaba.

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The DMRE minister said the decision to keep the mining sector going throughout the COVID-19 pandemic has paid off. The World Bank has revised its economic outlook following the severe supply and demand disruptions to the global economy during 2020.

In April 2021 the World Bank projected a 6% global economic growth. “South Africa was expected to grow by 3.1% in 2021, stabilising around 2.8% in 2022. However, in July 2021, the Bank revised its outlook where the global economy remained unchanged from the April 2021 forecast, with the global economy projected to grow by 6% in 2021 and 4.9% in 2022.

“The South African economy remains projected upwards to 4% (0.9% up from the April projections) and 2.2% in 2022. If we do things differently, we can change the projection and improve the growth of the economy,” explained Mantashe.

The growth of mines is intertwined with South Africa’s economic development

He pointed out the South African economy experienced its worse economic recession in 2020 when it recorded a third consecutive quarter of negative growth. The mining sector was the biggest contributor to this negative growth at 21.5% with the overall GDP contribution at minus 1.7%.

This was the biggest slump in the sector, attributed to supply and demand disruptions caused by the hard lockdown towards the end of the first quarter. The second quarter of 2020 saw a share economic decline at 51% with the mining sector contracting by 73.1% while electricity, water and gas contracted by 36.4%.

The world’s economy has rebounded in 2021, driven largely by infrastructure stimulus packaged by global advance economies – 1% and 1.2% in the first and second quarters of the year. By March 2021, these infraustrcture packages, coupled with demand driven by opening economic activities in manufacture-based countries has led to several metal prices increasing.

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While many sectors in South Africa shed jobs as they weathered the COVID-19 pandemic, the mining sector remained resilient. The mining sector has managed to increase its contribution to the country’s GDP from around 8.1% pre-COVID-19 to around 9.1% in the second quarter of 2021.

Mantashe said the mining sector working with government to create protocols to keep the mining and energy sectors operational during the lockdown was key. “We must sustain this relationship to ensure that we further increase the sector’s contribution to the GDP to around 12%.”

Transforming the mining sector

Mantashe said the government is continuing its efforts to implement the Mining and Petroleum Resources Development Act and Mining Charter. “Failure to transform the industry would mean we subscribe to a principle of depriving black people of empowerment. Transformation cannot be theoretical; it must be practical. We must be seen transforming the industry.”

Following the High Court judgement on the Mining Charter which clarifies that the charter is a policy document, the DMRE will work with provinces to take ownership of investment drives into the mining sector. They recently hosted a Provincial Mining Investment Conference in Limpopo and while now move on to the North West Province and the Northern Cape. “We see that belt as a mining belt that must take responsibility and ensure that they take ownership of being mining provinces in South Africa.”

Mineral exploration strategy and geoscience data

A mineral exploration strategy, ready to be approved in Cabinet, is aimed at securing at least 5% of the global share of exploration expenditure over the next five years.

Various interventions proposed in this strategy meant to address regulatory bottlenecks include updating the country’s geoscience data and assisting junior exploration companies.

The minister insisted strides have been made in publicising the country’s geoscience data through the Council of Geoscience. “We are in the process of integrating the geoscience information to the country’s cadastral system which features mining rights locations and will be available to all investors by just a click of the button.

“We have also begun with the process to update our mining application system to a more modern and user-friendly cadastral system. The process to procure this system is at an advanced stage. Once completed, this will help us to fully address the challenges of backlogs in the application process.”

Relationship between mining sector and energy generation is changing

Mantashe reiterated that the implementation of the IRP2019 to expand the country’s energy generation capacity remains a priority intervention to support a rapid economic rebound. The government is finalising the addition of 2,000MW of power through the Risk Mitigation Independent Power Producer Programme. “The deadline for preferred bidders to reach financial closure has been extended.”

The amendment of Schedule 2 of the Electricity Regulation Act to increase embedded generation to 100MW without needing a licence has a greater effect on mines though. More mining companies could now generate energy for their own use which could take pressure off the country’s strained national grid.

Bid Window 5 of the REIPPP programme has been opened to add 2,600MW of renewable energy to the grid and talk around Bid Window 6 has started.

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Theresa Smith
Theresa Smith is a content producer for Clarion Events Africa.