Move beyond narrow economics, focus on people-centred policies
If it can be shown that electricity cuts to mining and smelting output lead to wealth preservation – not destruction – because valuable minerals are left underground for future generations to extract in a more sensible way, then the economists’ models should be rebooted.
The net wealth depletion of mining varies radically, thanks to volatile prices. As one example, excluding the platinum and diamond sectors, in 2019, the World Bank calculated that in two years of extremely high commodity prices, 2008 and 2011, the depletion loss of coal and gold, iron ore and other minerals exceeded $20bn each year.
Even higher amounts of mineral value are anticipated to have left the earth in 2020 to 2022, due to soaring prices and extraction volumes. And by adding back the single largest mining sub-sector, Platinum Group Metals, at 23% of mining value (though neglected by World Bank researchers), the amount of wealth loss is double the contribution of mining to GDP.
The mining/smelting industries’ most active lobbyists are in the Energy Intensive Users Group (EIUG). Its 27 members, according to its web- site, “account for over 40% of the electrical energy consumed and collectively contribute to 22% of the South African GDP”.
Mining and smelting firms claim they are providing royalties and taxes, jobs, backward and forward economic linkages (to suppliers and customers), infrastructure investment and revenue inflows from exports. They also claim the biggest smelters help stabilise the grid.
Critics point out that the behemoths are not only consuming double their fair-share ration of net wealth and electricity/GDP but they are also insulated from Eskom’s full load shedding, with industrial users facing only a 10% reduction of power at Stages 1 and 2, 15% at Stage 3 and 20% at Stage 4. And the biggest, South32, has a confidential special pricing agreement, dating from apartheid, that gives it energy at around 1/8th the price per unit that ordinary households pay.
Given that the net outflow of wealth and the consumption of power far outstrip the sector’s contribution to GDP, there is an urgent need to impose electricity demand management based on a rational cost-benefit analysis, instead of the shared time- of-use power cuts affecting everyone.
After all, tens of millions of South Africans (mostly black) are unable to afford back-up systems – home solar panels and batteries, generators and inverters – and so, running a house- hold without inexpensive, always- accessible electricity means the unpaid labour of women soars. For sexist economists, this matters not a whit, because like pollution and depleted mineral wealth, women’s unpaid labour – “social reproduction” – is not valued, and not included in GDP.
But it should matter to those who believe gender justice needs prioritisation in public policy. If so, there is an urgent need to switch electricity from the most inefficient guzzlers, to the women of households who require clean energy – not paraffin, wood or coal – to keep their families and broader society ticking over.
There are many targets for early shut down of electricity guzzlers. Consider two examples. South32 (formerly BHP Billiton) has two mega-smelters, one in Mozambique (Mozal, north of Maputo) and Hillside at Richards Bay. More than 14 years ago, one of the country’s business leaders, Derek Cooper from Standard Bank, told then-president Thabo Mbeki that, for the good of the country, Eskom should chop South32’s power supply for smelting, so the rest of the economy could receive the scarce power.
Cooper was praised at FinWeek: “Those monsters are just about the least appropriate form of investment for South Africa’s stage of economic development. Aluminium smelters use imported raw materials, create few permanent jobs and raise major environ- mental issues. As both their supporters and critics concede, they’re, in effect, a way of exporting electricity – which is their largest single cost component.”
Five years later, in another load- shedding bout, such demand management came up again. Parliamentarians railed against South32’s extremely low prices, and a Ventures Africa writer remarked that belated cuts to South32 smelters were appropriate, because “Eskom’s move vindicates Standard Bank”.
Again, it is high time to question the abuse by EIUG’s mainly Western multinational corporate member- ship. A few weeks ago, Business Day columnist Michael Avery called on Eskom to “mothball electricity- guzzling smelters”. This is also common sense to the General Industries Workers Union of South Africa, which, in July, decried Eskom “subsidising this mega-corporate which imports bauxite to make aluminium.
“This process is not only extremely carbon-intensive and capital-intensive (with few jobs), but the Australian firm mainly exports the aluminium as well as the profits.”
A second obvious target for demand management is Sasol’s Secunda refinery, which is the world’s worst hot spot for CO2 emissions. In an extremely inefficient process, Sasol squeezes Mpumalanga coal and Mozambican gas to make liquid petrol. But this is an apartheid hangover from the oil sanctions era.
Today, it is far less carbon-intensive to simply import refined petrol, and the closure of most oil refineries over the past two years has not led to any substantial hitches when house-holds and businesses fill up at the garage.
Demand-management strategies are long overdue, and redistribution would bring real relief to the country’s majority-poor households, in terms of better access and lower prices. It would also lower South Africa’s vulnerability to “Carbon Border Adjustment Mechanism” climate sanctions to be imposed by western trading partners in coming years.
And the country’s contribution to the world’s “social cost of carbon” – measured by scientists at R54 000/ton damage – five times South Africa’s annual GDP) – would like- wise be lowered since the smelters and refineries are extreme CO2 and methane emitters.
But if these arguments are not accepted due to adverse power relations, and if power-guzzling by the western multinational corporations– a group far more adept at looting South Africa’s wealth than even residual white monopoly capitalists – continues, then we mortals will have to reduce consumption still further thanks to De Ruyter’s ratcheting up of load-shedding stages in coming weeks and months. And that will simply illustrate ongoing state capture when it comes to Eskom, in a version just as wicked today as was engineered during the Hitachi bribery of Chancellor House for Medupi and Kusile con- tracts, and the subsequent “Zupta era”.
*Patrick Bond is the Professor of Sociology at the University of Johannesburg, and author of the book Politics of Climate Justice