Increasing disruptions to power supply from South Africa’s struggling utility Eskom could hit mining companies plans to invest, two top industry executives warned on Wednesday.
“I think the impact of Eskom is far more pronounced than the impact of COVID, although COVID is getting all the attention,” Nico Muller, Chief Executive of Impala Platinum (Implats) said during a platinum group metals (PGM) conference.
He said power supply from Eskom would have a “material bearing” on future decisions on growth.
Eskom, which generates the majority of South Africa’s power, has for years struggled to manage supply from ageing coal-fired power plants and has imposed intermittent blackouts denting economic growth and hurting business sentiment.
The power utility said in February that there was an increased possibility of power cuts over the next 18 months.
Anglo American Platinum Chief Executive Natascha Viljoen, who was also among the speakers, said power supply was not the main driver for the company’s investment decisions but was determining investment appetite and preventing opportunities including base metal beneficiation, a process of value-addition to mined metals.
Mining in South Africa has been hit hard by the pandemic as lockdowns led to mine closures and miners contracted the disease, but a weaker local currency and higher metals prices cushioned the impact of reduced output.
“Water and power security play a vital role in our investment decisions,” said Muller.
Blackouts returned in August, worsening last week as Eskom ramped up cuts to 4,000 megawatts (MW) per day forcing up to almost 8 hours of power cut. The utility has since downgraded the outages to a lesser level.
The cash-strapped utility has sapped investor confidence, with heavy energy users such as miners and smelters unable to ensure security of power supply, forcing miners to seek permission to generate their own power.
President Cyril Ramaphosa has promised to ease regulatory curbs on “self-generation” after some mines shut down during the worst power outages on record in December.
(By Tanisha Heiberg; Editing by Promit Mukherjee and Alexandra Hudson)