Mining losses could hit GDP by R5,6bn

South Africa’s mining industry could lose up to R9,2-billion in revenue and the country’s GDP could take a knock of up to R5,6-billion as a result of the power restrictions imposed on mines by Eskom last week.

T-Sec economist Mike Schussler estimates that the mining industry is losing about R330-million in revenues a day as a result of halted operations.

Mines withdrew workers and cancelled shifts on Friday and over the weekend after Eskom warned them it could not guarantee electricity supply to mines.

Schussler said on Monday that the effect of the mine stoppages on the GDP, which strips out the value-add, is about R200-million a day.

While Eskom has agreed to avert the crisis by allowing mines to use more power than necessary for survival, its initial intentions to restrict supply dramatically for between two and four weeks would have cost the economy billions of rands.

Mining companies hope to resume production later this week after being allowed to carry out underground maintenance work in mines across the country.

“We are starting to emerge from a crisis that had the potential to undermine the viability of the South African gold industry,” Mark Cutifani, CEO of AngloGold Ashanti, said in a statement.

A meeting on Wednesday between mining firms, government officials and Eskom will determine when and how mines can start production, expected to be in a phased process in order not to compromise the power grid. Mines will be asked to cut their power usage, officials said.

According to the Chamber of Mines’s latest data, the mining industry earned R195,6-billion from mineral sales in 2006. While it accounted for only 7% of GDP directly, the indirect multiplier effects took its contribution to about 18,4%.

“The mining industry’s contribution to GDP is small, but the knock-on effects are severe,” said Schussler. “This will have big repercussions on the economy.”

Trade unions have, in the meantime, warned that job losses loom as producers lose millions of rands due to rolling power failures.

“Companies are losing millions of rands. Companies might start retrenching workers in order to make up for the losses,” said Jaco Kleynhans, Solidarity spokesperson.

The National Union of Mineworkers (NUM) also fears job losses are on the cards as the industry struggles with the power cuts, which were labelled a “national emergency” by the government last week.

“Obviously, companies would shed jobs to cover up for the losses incurred in the past few days,” said an NUM official who declined to be named.

The mining industry continues to be one of South Africa’s major employers with workers employed in the sector topping 450 000 by May last year.

The government insists the crisis does not threaten the country’s plans to host the 2010 Soccer World Cup.

For weeks, homes, malls and businesses have been dark for hours a day, while failed traffic lights have caused accidents. President Thabo Mbeki’s government, distracted by a leadership struggle in the African National Congress, faces growing criticism for years of underinvestment in power generation.—I-Net Bridge, Reuters

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