: Eskom Increases Equal Unemployment for Miners

Eskom's planned tariff increases of around 45% could lead to another bout of countrywide retrenchments in the mining industry, adding the more than 34 000 mineworkers in South Africa who have already lost their jobs during the economic crisis.

“There are already indications that marginal gold producers such as DRDGold and Simmer and Jack will have to let employees go by means of Section 189 processes due to, among other things, the enormous electricity price increase to be implemented,” explained Solidarity spokesperson Jaco Kleynhans.

Electricity costs make up between 10% and 20% of a mine’s running costs. Gold is currently trading at record levels in dollar terms, but the production margins of goldmines are under pressure. Meanwhile other large gold producers, such as Harmony, have also started making negative noises about the closing of shafts. South Africa is the largest producer of gold and aluminium in Africa and the world’s leading producer of ferrochrome, platinum and raw material for the manufacturing of stainless steel.

Solidarity announced earlier this week that if the National Energy Regulator (Nersa) grants Eskom’s application for an annual tariff hike of 66% over the next three years, electricity tariffs will have increased by 666% over the five-year period from the start of 2008 to 2012. If Eskom’s alternative request for an annual increase of 45% over three years is granted, it would result in a total increase of 410%. A third proposal is for tariffs to be increased by 146% in 2010, without any increases in 2011 and 2012. This would bring about a nominal increase of 312% over the five-year period.

“With these massive increases, a second wave of retrenchments is looming for the mining industry. For a long time mining was the cash cow carrying the economy, helping to generate tax income for the government. Now this tax stream is going to dry up. There will also be numerous job losses.

“A large-scale electricity increase above the inflation curve will seriously affect mining and there could be a drastic levelling out. Gold and platinum mines are deep and therefore the product processing is electricity intensive. The mining producers are just beginning to recover from the credit crisis, and commodity prices have been under severe pressure. If electricity price increases are out of proportion, it could have extremely negative consequences for workers and producers,” Kleynhans warned.