Mineral Resources and Energy Minister Gwede Mantashe said on Thursday that the government was pushing for the reduction of the cost of electricity to save the economy from a complete collapse.
Mantashe told delegates at the Joburg Indaba economic growth in South Africa had been hampered by high electricity costs. He said if the cost of electricity could be brought down, the government would have won half the economic battle, “If we are going to win that, the price of electricity must be at the right level,” said Mantashe.
“If it is too expensive, we are going to find manganese and chrome miners exporting raw material, and rather pay tariffs than not export. If the price of electricity is at the right level we are going to reopen the 47 refineries in the sector that have been mothballed today.”
Mantashe said that load-shedding, electricity pricing and a five months protracted strike in the gold sector accounted for the first quarter decline in the mining sector.
He said reliable and secure supply of energy was a priority and the reason the government had started engagements with coal producers and Independent Power Producers (IPPs) to discuss the role of electricity in contributing to economic growth. Reports claim that Mantashe and Public Enterprises Minister Pravin Gordhan met IPPs in Pretoria on Friday to get their commitments on lowering electricity tariffs. Mantashe said the government was talking to coal producers and IPPs to lower their electricity tariffs.
He said the energy regulator and licensees would also be approached.
“The (mining) industry needs cheaper electricity for it to perform,” he said. Mantashe said it was important to talk about the price of coal to state-owned power producer Eskom. “Others say that it is collusion… These are discussions about how to reignite the economy, grow it and make it function for everyone,” Mantashe said.
In August Gordhan said that he was worried about high coal costs. Speaking at the Eskom annual financial results presentation he said the 17 percent hike in coal costs was “extraordinary”.
“We need to have tough talks as to whether they are serving the national interest,” Gordhan said at the time. “This triple inflation number is not acceptable. I intend to engage with the industry.”
In July Eskom said its projections showed that it would pay 20 percent more for coal this financial year after being forced into more expensive short-term coal supply contracts. Mantashe said that the current electricity prices were not sustainable as they could hamper economic growth. “At these prices of electricity, this economy is going to collapse,” Mantashe said.
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