Energy crises impact whole Southern African region mining sector

The Southern Africa region has been hit by shortage of electric power - a development which is weighing down on the mining industry, the very same vehicle that has been contributing most greatly to the region’s FDI growth.

BLANTYRE - 

Despite the mining industry in the southern African region contributing immensely to the region's Foreign Direct Investment (FDI), an energy crisis that has hit the region is threatening to overturn such gains and deny mining companies maximum benefits from the current strong minerals market.

The region's major mining countries of Zambia, Zimbabwe, Botswana and South Africa confess that power outages are proving to be spanners in the works of an enhanced mining industry in the region. The countries have attributed the outages to archaic infrastructure failing to handle a growing demand for energy.

Namibia, which is fast becoming a hotbed for uranium mining companies, is the latest African country to have gone public that all major mining investment will have to wait due to an energy crisis. Media reports in Namibia indicate that NamPower - Namibia's state electricity utility company has ordered that all new mines will have to wait at least until 2009 to get grid power.

The Namibian problem has been compounded by reports that South Africa's energy company, Eskom would stop exporting electricity to neighbouring countries because the company is incapable of meeting its own domestic demand.

Eskom has also suggested that the South African government should not venture into new big projects until 2013 when the utility company believes the energy crisis would have subsided. And mining companies themselves in South Africa are already feeling the pinch of shortage of electricity. Aquarius Platinum reported a Q2 output fall of 2 percent, which among other things was attributed to power outages.

Ferrochrome producer, International Ferro Metals (IFM) reported on January 23 that it produced 93 317 t of ferrochrome compared to its potential of producing up to 133 700 t. The shortfall in production was primarily due to technical problems at two of its furnaces, but electricity supply interruptions had also contributed, according to a statement by CEO Stephen Turner.

The media in South Africa reports that Eskom has warned that electricity supply will be tight until at least 2013, when its new capacity rolls out. The reports say big projects like Rio Tinto's smelter at Coega might be delayed due to short supply of Electricity.

And in Zimbabwe, since Monday, January 21,coal mining and processing at Hwange Colliery Company have been suspended owing to power outage that has hit the mine, the first time since the country started experiencing power problems.

According to state-owned newspaper The Herald, the stoppage of mining and processing of coal has resultantly worsened coal availability, further crippling the country's power generation capacity which ironically relies on Hwange Colliery Company's coal for the generation of 70 percent of its electricity.

In Zambia, London-listed Vedanta Resources Plc has suspended operations at its Konkola Copper Mines (KCM) due to flooding which was caused by intermittent power supply at the mine. Zambia's head of Chamber of Mines Fredrick Bantubonse told Reuters that if power outage continues, the country will register a nosedive in its copper production in 2008. Several other of Zambia's big copper mines have also reported loss of production due to power cuts, as well as consequential equipment damage.

REMEDIAL MEASURES
Realizing the danger the energy crisis has on the region's economic growth, energy ministers from Southern African Development Community (SADC) resolved at a meeting in Harare, Zimbabwe, in mid 2007, as a short-term measure, to undertake generation projects that will add 6,700 megawatts (MW) of power to the regional network administered by the Southern African Power Pool (SAPP) Coordination Centre in Harare. The ministers undertook to raise US$7.88 billion for this project.

This measure is meant to reduce to zero the regional shortfall currently at 1,000MW and add a reserve margin of 4,000MW.

However this will not be available until 2010. The statement the ministers released at the end of their meeting reads "regional generation surplus is expected to increase by 5,000MW from generation projects in progress by 2010. "

In addition, the region has a long term project that should come into effect by 2020. The member states want to undertake power generation projects, which will add 32,000MW to the SAPP network at a cost of US$32 billion, according to a statement by the energy ministers.

Southern Africa has a current installed capacity of 53,000MW but the dependable capacity is only about 41,000MW. The region did project it would run out of surplus generation capacity by 2007 long time ago but very little was done to address the situation and ensure it had enough electricity beyond that date.

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Related Links ARTILCES:  Another platinum major warns of production shortfall  Zambian copper mines lose production and suffer damage from nationwide power cuts  Anglo Platinum production badly hit by storm flooding  South African mine production being affected by power cuts  Konkola halts operations after power cuts damage equipment   South African miners feeling power pinch  OTHER PAGES:  ENERGY AFRICA

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