Mining Industry Grapples With Energy And Water Supply Challenges

South Africas mining sector faces mounting concerns about water and electricity supply despite some improvements in logistics and production during 2024. While the industry has seen temporary relief from load shedding, experts warn that unresolved infrastructure and energy issues continue to hinder its full economic potential.

According to Hugo Pienaar , Chief Economist for the Minerals Council South Africa, while some progress has been made in logistics and electricity supply, persistent challenges continue to weaken minings contribution to the countrys GDP. Mining contributed 6 to South Africas total nominal GDP in the first three quarters of 2024 down from 6,3 in 2023.

Exported goods worth about R800 billion contributed 45 to the value of overall South African merchandise exports, Pienaar said at a press conference during the annual Investing in Africa Mining Indaba, which kicked off in Cape Town on Monday, February 3.

The sector has been temporarily relieved of electricity constraints with load shedding suspended for 10 months but logistics remains a major concern. While we welcome the improvements we have seen around logistics and the overall increase in tonnages moved by rail in the past year, concerns around logistics remain, said Pienaar.

The Richards Bay Coal Terminal reported an increase in coal volumes handled, rising to 52 million tons last year from 48 million tons the previous year. Two financial years ago, we were moving less than 150 million tons on rail. The current target is 170million and, while it is doubtful we will get there, the reality is that volumes are increasing, Pienaar said.

Funding for Transnet is a critical issue that needs to be addressed. Mzila Mthenjane , Chief Executive Officer of the Minerals Council, said it is clear that Transnet cannot resolve its infrastructure challenges on its own and private-sector involvement is necessary.

The state-owned enterprise has indicated it needs around R15billion annually to address its infrastructure challenges. However, Treasury has been vocal about its reluctance to provide direct bailouts due to ongoing fiscal pressures.

We can expect the tough-love approach from Treasury to continue, said Pienaar, indicating that greater emphasis will be placed on private-sector participation. What that will look like is still to be decided. Will the private sector run its trains on a broken network? Will there be a shift towards private-sector investment in infrastructure instead of a Treasury bailout? We need to find answers to these questions.

Acting Minerals Council President Paul Dunne said interventions are necessary for Transnet not only to improve the movement of export cargo and enhance the competitiveness of mining houses internationally but also to alleviate pressure on the countrys rail network. Every train that reaches the port takes 100 heavy-duty vehicles off the road this is important for easing the strain on the road network. Much of the missing volume on rail finds its way to the port by road, he said.

The Minerals Council also raised concerns about water supply challenges. The return of load shedding this past weekend was described as a step backwards for the sector. Addressing our challenges is critical, said Pienaar, citing the decline in manufacturings contribution to GDP over the past 30 years as an example. Construction has stagnated despite ongoing discussions about infrastructure spending and the urgent need for investment in South Africa.

When looking at mining volumes and prices, the sector has remained relatively stable despite volatility. Our contribution to GDP is higher than 30 years ago but this is primarily due to price increases. If we look at volumes alone, the trend mirrors that of manufacturing, which has declined.

The mining sector has effectively been bailed out by commodity prices. This remains a massive lost opportunity if we could add volume growth to price gains, we could be contributing significantly more to the fiscus and expanding our exports, he said.