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Eskom & the power vacuum Posted: Fri, 18 Jan 2008 [miningmx.com] -- ACCORDING to Minister of Minerals and Energy Buyelwa Sonjica, referring to the latest Eskom power crisis: “There is no need to panic about future investments as has been alluded to by some.” Really? Her comment reminds me of the quote from an astronaut when asked if he felt scared when about to blast off. He replied: “Anybody who says he’s not scared does not fully understand the situation.” When the financial director of Eskom, Bongani Nqwababa, comes out and states flatly that “the king has no clothes” then you better realise it’s crunch time. It was Nqwababa who raised the warning flag over the future of the Coega aluminium smelter and requested Government to hold off on big new industrial projects until 2013. Eskom’s top officials should have been this blunt a long time ago but kowtowing to their political masters, they have time and again put a “best face scenario” on the situation. “We can cope” was the message until just before Christmas. The reality is that far too frequently South African politicians and bureaucrats have not paid enough attention to the opinions of people at the “sharp end”. In this case Eskom which has to supply the power and the mining industry which not only is a major consumer but supplies the 100 million tonnes plus of coal that Eskom burns each year. That’s how we got into this mess. Government was warned repeatedly by Eskom and by the coal mining groups in the late 1990’s that this crisis was looming. Government failed to take those warnings seriously. They stalled and refused Eskom permission to build another power station until it was too late. Instead, they launched a string of consultative processes and studies looking at such allegedly viable options as sourcing most of South Africa’s future requirements from hydropower schemes in the Democratic Republic of Congo. Sadly, it’s a pattern which can be found in other areas such as the length of time it has taken Transnet to get its act together on the expansions of the Sishen-Saldanha iron ore line and the Richards Bay coal line. A rare example of where government has listened and acted was National Treasury’s decision to radically amend the royalty bill after heated opposition from the mining industry. So now the planned 6% growth economic growth rate target has to be in jeopardy which has major social implications. Coega at risk Also at risk - despite Sonjica’s apparent optimism - is the level of future investment in general and Rio Tinto’s proposed $3bn Coega aluminium smelter in particular. Coega is a sore point for the ANC. It has been trying to attract a major industrial project to the Eastern Cape since they got into power. They finally succeeded but will now see it at best delayed - and at worst canned - because of their failure to give Eskom permission to build a new power station in 2000. That was when construction of the new Medupi station should have started to avoid what is now happening. Optimistic noises are still being made about Coega but aluminium smelters live or die by a guaranteed source of cheap power. Ask yourself the following question - is Rio Tinto CEO Tom Albanese really so stupid as to build a $3bn aluminium smelter in a country which cannot guarantee the power supply? I don’t think so but if it turns out that he is, then the sooner BHP Billiton takes Rio over and he’s replaced by Marius Kloppers the better. Click Here to subscribe to our daily newsletter
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