Cost of power cuts to current account
The government could have scored an extra R500m in taxes last year from Anglo American Platinum if it wasn't for electricity blackouts, says outgoing CEO Chris Griffith.Amplats announced record earnings of R30bn this week, which could have been R1.5bn more if the government had allowed it to produce electricity for its own needs, he says."Never mind what we've lost in the last couple of years, 89,000oz were lost in the final quarter. We lost R1.5bn from that."Government, the fiscus, the taxpayer lost R500m they could have got if we'd been able to refine those ounces which we'd already mined but could not refine because there was no electricity."He says Amplats specifically included this bit of information in its presentation "to contribute to making sure that people understand that it is not only some business people or somebody else who is losing, but the taxpayer"."Every day the government loses a third of all that we lose due to load-shedding. And that's just one company."Some folk in government need to be educated so that they understand this."Amplats has a 75MW-100MW solar plant in development but has been blocked by government policy, which forces dependence on Eskom.Promises by President Cyril Ramaphosa to change this have not led to any concrete action so far."Government still needs to get out of the way of industries like mining, which want to develop alternative sources of energy," says Griffith.He is "surprised and disappointed" by the lack of follow-through on government assurances.Its foot-dragging is putting not only the industry "but the whole country in jeopardy"."We know what the solutions are. We've got to pursue them with utmost haste."Scratching around at 1% economic growth is an utter travesty for this country with its massive potential."This includes mining, he says."Gold mining is coming to an end of its life in SA but there is still huge potential for growth in the rest of the industry. We've got these wonderful resources in the ground and there's a huge future for them."The biggest and most immediate threat to this is the government's continued failure to free mining companies from their dependence on Eskom."We can't mine if we don't have energy."Griffith, 55, surprised the market with his announcement this week that he'd decided to step down.Though benefiting handsomely now from high prices for platinum group metals, he's had a torrid time of it since being appointed by former Anglo American chair Cynthia Carroll in September 2012.Majority shareholder Anglo had had to bail out the company to the tune of R10bn in 2010/2011, but it was still "very close to having to be bailed out again or going insolvent".Griffith embarked on a programme of major restructuring, which involved shutting loss-making mines and retrenching thousands of miners.The then mining minister, Susan Shabangu, was furious and threatened to revoke its mining licences if it didn't stop.It was a threat Griffith took very seriously, "but just hanging around hoping it would get better was not a solution".What was happening was not just part of a cycle. "There'd been structural changes to demand and this industry was completely messed if we didn't fix it up."Rhodium, after hitting $10,000/oz, was "thrifted out" of auto-catalysts."We went from 27% of revenue from rhodium to 5%."Platinum was replaced in petrol auto-catalysts with much cheaper palladium."We lost a quarter of demand for platinum as a result."While all that demand was disappearing, new supply in the form of recycling increased from 5,000oz to 2-million ounces.Such massive changes to the structure of demand and supply led to plummeting prices. At the same time, the industry was being hit by cost increases of three times inflation."The industry was doomed. At least 60% of it was loss-making, including 50% of Anglo Platinum. That loss-making production was sucking the life out of the assets that were making money."It was very, very clear at the time that this industry was in big trouble."The government had been briefed "numerous times" on the situation, what would have to be done and how at the very least it needed security and "didn't need all the pressure from changing the mining regulations"."There didn't seem to be a lot of support."When the storm came, it was no surprise."We expected and prepared for the consequences in our scenario planning. That, frankly, we were going to have to pursue this restructuring and repositioning of the company notwithstanding the pressure we were going to get from all sides."Amplats was hit with a five-month strike with no idea how long it would continue."By the time you get to five months you're thinking, when is this ever going to end?"The minister's threat to revoke its mining licences hung over it all the time. "This wasn't just stressful for us but for the whole workforce, most of whom didn't know if they'd still have a job at the end of the month."In the event, of course, more than 20,000 lost their jobs, from CEO level down.The worst part was that "we didn't know if the things we were doing would work"."But we were absolutely clear in our minds that if we didn't do all that stuff, we were going to go out of business."Griffith, who studied mining engineering at Pretoria University, went as CEO to Amplats from Kumba Iron Ore, where he'd had to fight off an attempt by the Guptas and other politically connected individuals to steal part of the company's flagship Sishen mine.It was the most stressful thing that had happened to him "because there was massive fraud under way. This was really bad stuff happening. Those rights were being fraudulently taken away."The kind of pressure we saw from in particular the department of mineral resources at that time was astronomical. We know now it was the early days of state capture."He says he's quitting because "the things I needed to do at Angloplat have been done".