SOUTH Africa’s Minerals Council said Government’s budget statement on Wednesday was a missed opportunity to address the energy crisis facing the mining sector.
“The mining industry is disappointed that there was no mention in the budget about reduced electricity tariffs for the ferroalloys industry,” said Bongani Motsa, acting chief economist at the Minerals Council.
Industrial electricity prices have surged more than 900% since 2008. As a result, the country’s ferrochrome industry, employing more than 20,000 direct and indirect jobs, hangs in the balance. If a competitive tariff is not provided by Eskom, the state-owned power utility, the industry will close.
The Minerals Council said it had hoped Finance Minister Enoch Godongwana would use the budget to address the crisis.
It also took issue with the budget’s broader failure to acknowledge mining’s significant contribution to tax revenues, despite the sector’s outsized role in the fiscal improvement Godongwana trumpeted in his National Budget address in Parliament.
South Africa’s gross tax revenue rose by R21.3bn, with mining central to that performance — tax collections from the sector jumped 29%, driven by higher gold and platinum group metals (PGM) prices alongside increased chrome and manganese exports. Mineral royalties rose to R11.8bn from R10.6bn the previous year.
“The absence of any direct mention of mining’s performance and its contribution to the fiscus, despite its significant impact on tax and the budget surplus, was a missed opportunity,” said Minerals Council CEO Mzila Mthenjane. “Mining should be a sector of national economic priority.”
Gold and PGMs alone account for roughly 40% of South Africa’s mining production and employ approximately 262,000 of the industry’s 474,000-strong workforce. The sector provided critical support to the domestic economy during and after the Covid-19 pandemic in 2020 and 2021, the council said.
However, it welcomed a R21.9bn allocation to five major infrastructure projects, including restoring capacity on iron ore and coal railway lines to 77 million tons and 60Mt respectively. Total planned public-sector infrastructure investment over the medium term stands at R1.07 trillion.
Mthenjane called for future budgets to include exploration incentives and targeted assistance for distressed sectors including ferrochrome and diamonds to sustain and grow long-term employment.
Glencore, which with Samancor, provides supports the majority of jobs in the ferroalloys industry in South Africa has expressed confidence that Eskom will come up with a workable energy solution for its Lion, Boshoek and Wonderkop ferrochrome smelters by February 28 – a deadline for an agreement previously set by Eskom and Glencore.
Last month, the National Energy Regulator of South Africa granted the facilities an interim tariff of 87.74c per kilowatt hour — 35% below the previous rate — which was sufficient to resume operations at Lion but falls short of the 62c tariff Glencore says all three smelters require to be commercially viable long-term.
Glencore Alloys CEO Japie Fullard said tariff relief was only a starting point, with the group committed to broader cost and technology improvements to remain globally competitive.
