JOHANNESBURG, March 27 (Xinhua) -- The Minerals Council of South Africa said it is worried about the tariff increases recently granted to Eskom as they could destabilize the mining industry and lead to over 90,000 job losses in the next three years.
The Minerals Council took on the matter after the National Regulator of South Africa (Nersa) granted power utility Eskom average tariff increases of 9.4 percent, 8.1 percent and 5.2 percent over the next three years.
The Council said the effects of this could be devastating.
"There is no doubt that the substantial tariff increases will have a major impact on the industry's cost structure, jeopardizing the viability of marginal and loss-making mines and, inevitably, accelerating job losses at energy-intensive mines in particular," Council's Henk Langenhoven said on Wednesday.
Langenhoven told Xinhua the mining sector is the biggest user of electricity in the country.
"It is most disappointing that the regulator has chosen to support Eskom's own inevitable downward spiral that will come as a result of inflated tariff increases and declining electricity usage by a critical consumer. The mining industry consumes around 30 percent of Eskom's annual power supply, for both mining and smelting activities," he said.
The mining industry is not only a major customer, but a consistent and early payer, Langenhoven said.
"The mining industry is a price taker which means that it does not set the price of the product it produces. These prices are set by the market." he said, adding the sustainability of a mining operation is dependent on its "ability to contain its cost of production."
Statistics SA's March report showed that the mining sector is in recession.
