Gold Mines Go Dark in South Africa

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After weeks of rolling blackouts across South Africa — one of which stranded hundreds of tourists at the top of Table Mountain when Cape Town's world famous cable car ground to a halt — the government on Friday declared a "national electricity emergency."

And the impact of the power crisis on the national economy was underlined Friday when the country's gold mines suspended operations for fear that power cuts would trap workers underground. Gold Fields, which owns the world's largest gold mine, said the state-owned power utility Eskom, which supplies 95% of South Africa's electricity, had warned that outages could continue for a month. The world's No. 1 platinum producer, Anglo Platinum, also shut down production at all its South African mines. Gold and platinum prices soared to record highs on the news, spot gold reaching $923.40 an ounce and platinum $1,697 an ounce, although shares in the mining companies tumbled. The South African government has chosen to shut down power to the mines rather than cut off energy to hospitals and other essential public institutions.

"The unprecedented unplanned power outages must now be treated as a national electricity emergency situation that has to be addressed with urgent, vigorous and coordinated actions," Public Enterprise Minister Alec Erwin told a press conference. "We are viewing the next two years as being critical."

Erwin's timetable was clearly shaped by the fact that South Africa hosts soccer's World Cup, in 2010. Organizers expect the tournament to attract more than 300,000 visitors. But the South African Tourism Services Association said hopes of a tourist influx, already jeopardized by South Africa's raging violent crime, were now fading. "Will people come to South Africa to see them if they know they will be going back to hotels and guest houses with no power?" asked Michael Tatalias of the tourism association. "That means no hot meals, no clean laundry, no lights." (The football stadiums, however, will not go dark. The world soccer authority FIFA has required generators be built into each venue.)

The crisis has also raised questions over whether Africa's biggest economy can continue to grow at more than 5%. Across the country, industry, retailers and restaurants have been forced to close during the blackouts and an increasing number are warning of lay-offs in a country where unemployment is already 25%.

The government and Eskom say that the economy has grown too fast to cope with new energy demands, and South Africa must cut use by 10-15%. Power demand has increased 50% since apartheid ended in 1994, with almost 3.5 million homes having been added to the national grid from which much of the black population had been previously excluded. Little has been done to boost the electricity supply to keep pace with growing demand. Last December, President Thabo Mbeki acknowledged some of the blame for ignoring a 1998 Eskom report warning of an energy crisis in 10 years. "The president has accepted that this government got its timing wrong," Erwin said on Friday.

Erwin said energy prices would rise 14-20% in the years ahead to fund new power plants. Eskom, which has embarked on a $42.6 billion expansion program, expects outages to continue until at least 2013. Minerals and Energy Minister Buyelwa Sonjica said the government was studying the energy-rationing experience of countries such as Brazil and Cuba, and is considering expanding solar power in state institutions. All traffic lights would also be converted so that they are able to take solar power.

Erwin insisted the World Cup would be unaffected, however. "There is no threat to the successful holding of the event, as plans to ensure electricity security in that period are well advanced," Erwin said. By 2010, there will be a "far more comfortable margin" between supply and demand.