Eskom and BHP Billiton today announced that they have reached agreement on an amended power supply contract for the Mozal aluminium smelter in Mozambique. Discussions relating to the contracts for the supply of electricity to the Hillside and Bayside smelters in South Africa will continue over the coming months with the intention of concluding binding agreements before the end of Eskom’s 2010/11 financial year.

Read the full story

Local steel producers, to a large extent, held their own in 2009 despite of a number of them reporting down¬sizing and other survival measures. The severe downturn in the global economy was cushioned by the special circumstances regarding the construction of power stations and government’s low-cost housing and infrastructure spending.

Read the full story

BHP Billiton and Eskom have agreed to review the power supply agreements to the BHP Billiton’s aluminium smelters in South Africa and Mozambique. The parties will now work towards concluding negotiations for definitive legal agreements over the coming months.

The parties anticipate that such agreements could include a package of measures that would reduce the impact of financial derivatives on Eskom’s balance sheet while also ensuring a competitive supply of electricity to the smelters.

Details of the measures under consideration are commercially confidential, but may involve BHP Billiton assuming responsibility for the commodity pricing and currency exchange risks related to the contracts which would in turn reduce the volatility of Eskom’s earnings and improve its balance sheet.

These measures have been developed after lengthy discussions with Eskom that took into account the legal, technical and financial implications of the long term supply contracts.

BHP Billiton said that while the proposed measures would positively influence the electricity supply position over time, the grid would remain under pressure for the foreseeable future. The company would therefore continue to fulfil its commitment to reduce electricity consumption in support of Eskom and the country by maintaining a 10% power reduction in South Africa.

BHP Billiton is grateful to Eskom for its willingness to work with us in the development of mutually beneficial outcomes that are favourable to both parties and the public. We are confident that this will strengthen the foundation for a solid partnership with Eskom and our long term commitment to South Africa.

In South Africa, the mining industry is the second largest electricity consumer after the manufacturing sector. Electricity is not only an integral input in any mining process but it is also critical in ensuring a safe
and healthy working environment in underground mines.

“Electricity powers mining equipment and the transportation of personnel and materials,” explains Frost & Sullivan metals & mining anlyst Wonder Nyanjowa. “It is also used to pump underground water as well as to provide ventilation and refrigeration in mines.”

Curtailing electricity consumption in the South African mining industry to 95% of normal consumption, combined with other operational problems, has reduced capacity in the mines to approximately 90%. Mineral production has declined whilst the health and safety of employees has been endangered.

To offer decision makers a perspective on the overall impact of the electricity supply crisis on South Africa’s mining industry, Frost & Sullivan will be hosting an online analyst briefing on Thursday 25 March 2010 at 2:00pm GMT/ 4:00pm CAT.

The discussion will benefit equipment manufacturers, industry executives, policy makers, and the investment services industry.

To participate in this briefing, please email Patrick Cairns at patrick.cairns@frost.com with the following information: your full name, company name, title, telephone number, e-mail, address, company website and country. Upon
receipt of the above information, a registration link will be e-mailed to you. You may also register to receive a recorded version of the briefing at anytime by submitting the aforementioned contact details.

The Minister of Science and Technology, Mrs Naledi Pandor, has launched a R26 million programme to boost the technology base in 28 companies that manufacture castings in South Africa.

Launched at the Council for Scientific and Industrial Research in Pretoria on 1 March 2010, the Technology Localisation Programme of the Department of Science and Technology (DST) supports the Government’s Competitive Supplier Development Programme (CSDP), which is aimed at increasing the competitiveness of local suppliers through a range of demand and supply-side measures. This will assist local companies to leverage procurement opportunities from government’s large-scale infrastructure recapitalisation programme over the next 20 years.

The DST Technology Localisation Programme also supports other high-level government initiatives such as the Industrial Policy Action Programme (IPAP) that are set to help South Africa reduce its trade deficit while improving its long-term manufacturing capacity – a significant step towards scaling up efforts to promote long-term industrialisation and industrial
diversification beyond the current reliance on traditional commodities and non-tradable services.

It is important for local foundries to be globally competitive as they form the backbone upon which the country’s supply chains can be further developed for big infrastructure programmes, such as those of Eskom and Transnet, to support and drive localisation.

The Programme began with the identification of components for localisation in Eskom and Transnet’s CSDPs, and benchmarking of foundries with the technology to manufacture these components. Technology gaps were identified and Technology Assistance Packages developed to support localisation in the foundry industry.

Through this initiative, the foundries will be able to access expertise from DST activities in Advanced Manufacturing and Light Metals. The DST is working in partnership with the Departments of Trade and Industry, and Public Enterprises, the industry, and development agencies such as the United Nations Industrial Development Organization (UNIDO), to drive localisation in the country.

In a joint editorial comment, ManufacturingHub.co.za and Ferronews.com argue that the recent power hikes will, contrary to popular belief be a catalyst for industrial growth and innovation in the country.

Much has been made about the impact of the recent multi-year tariff hikes which the National Energy Regulator of South Africa (Nersa) has granted to power utility Eskom.

“Power hikes to cost 250000 jobs” and “foreign investors to be scared off by power price increases” scream news headlines on many of South Africa’s leading newspapers and financial news sites.

Without trivialising the impact of a power crisis or the additional strain on the average South African consumers wallet, these headlines and press statements are mis-leading and ill-informed.

The bizarre assumption is that humans will do nothing to change their behaviour and the country as a whole will choose not to innovate to address this challenge. To attach such lemming-like characteristics to one of the most innovative regions in the world is mind-boggling.

Humans as a species evolve and anybody who implies that they will continue behaviour which negatively hits them in the pocket needs to have their head read.

US president Barack Obama recently commented that the US had to focus on the development of nuclear technology at home to meet their power supply. He made a poignant comment saying that if the US didn’t focus on developing these technologies at home, then competitors in foreign countries would and the US would be forced to import these technologies. The end result would be no jobs for Americans in this sector of the economy and his mind that was unacceptable.

This is precisely the attitude we as South Africa need to adopt in the light of the challenges facing the country.

So where are the opportunities?

While independent power production is still not viable in South Africa, it is fast coming to a point where it does become attractive. If you can participate in a market which has guarantees of price increases of 25% per year for the next three years, it is going to start to look attractive.

Innovation around alternative energy sources is going to be given the go-ahead. Green energy, nuclear, solar etcetera is going to come into vogue.

The same could be said for the agriculture sector. We know that resource giants like Vale and BHP Billiton are piling into the fertilizer sector and ratings agency Moodys says it expects this trend to grow as alternative energy sources are sought.

Increasing demand and funding for skilled engineers, researchers and developers to come up with innovative solutions. Already companies such as Sasol and Anglo American have been investing in their own independent supply technology. Educators, lecturers and trainers will be needed to support the demand for these professionals both in educational institutions as well as within corporates.

In conclusion we know that there is a shortage of electricity on the supply side and we recognise that South African consumers and municipalities remain cash-strapped.

However the talk of economic collapse and fall-out is overstated and dangerous when in fact the opportunities far outweigh the threats posed to the country.

Marc Ashton
ManufacturingHub.co.za and Ferronews.com
Respond to this editorial contribution on newsdesk@rival.co.za

Follow Marc Ashton on Twitter – www.twitter.com/zamarcashton
Marc Ashton’s blog – http://badentrepreneur.bundublog.com/