Mines roar back to life

Thousand of workers in the major gold, diamond and coal producer and the world's top platinum miner, resumed underground blasting and digging after the state power firm Eskom boosted power supplies to the industry.

The cabinet has described the situation as a national emergency and parliament, due to open on Friday, convened early for a special debate in which legislators heaped criticism on President Thabo Mbeki's government for failing to avert the crisis.

The power crisis has badly shaken investor confidence in Africa's biggest economy, and is likely to slow economic growth and dent foreign direct investment. By halting South Africa's iconic mining sector, the power shortage has driven precious metals prices to historic highs and hurt the rand currency.

"If you cut electricity consumption, you're effectively cutting economic growth," said Razia Khan, London-based regional head of research Africa at Standard Chartered.

'On the back burner'

"Yes, the mining sector is continuing, but it is not at full tilt and won't be able to take advantage of the booming commodity prices. Also, all capital expenditure, or additional projects or refurbishment will be put on the back burner."

The utility Eskom will increase the electricity supply to mines by up to 90% by the end of the week, and has already raised power supplies to 80% for most mines.

But Eskom has asked that miners and other big industries cut back their consumption by 10 percent, and warned that it will start to ration supplies for all its customers in March.

Eskom has warned South Africans to expect a bumpy ride ahead because its power generation capacity is still lagging demand.

For weeks, the outages have infuriated South Africans and amplified criticism of Mbeki's cabinet, whose opponents blame it for failing to heed warnings years ago that it was not investing enough in new power generation to cater for the fast-growing economy.

"What did South Africa have before candles? Answer: Electricity," has become a common joke on radio station shows.

'Weeks of hell'

"Four weeks of hell," screamed The Star newspaper headline on Wednesday, citing Eskom's plans to cut power over the next four weeks to most of its customers, followed by months of rationing in a bid to cut national power demand by 10%.

The opposition Democratic Alliance said Eskom's woes were caused partly by a severe skills shortage, a common problem in the wider public service sector, and put at risk other services.

In the mines, chief executives were busy quantifying the output and revenue losses after re-starting production.

"We are busy trying to figure out the losses," Reidwaan Wookay, a spokesperson at gold producer Gold Fields said.

Mining resumed at the world's top platinum and diamond producers Anglo Platinum and De Beers respectively, and gold producers AngloGold Ashanti, Gold Fields and Harmony. BHP Billiton also re-launched production at its manganese mines.

South African blue chips cheered the resumption, rising 2% to recoup losses since Friday's production halt, but analysts doubted 2007 mining output would meet their forecasts.

Unions said their workers had lost production-related bonuses, but the fear of job losses had the crisis persisted had abated. Still, they worried job growth in the mines would slow.

Many blame the government for ignoring calls by experts as long as 10 years ago to build new power plants. Critics worry that the lingering crisis could botch South Africa's hosting of the 2010 soccer World Cup, but the government insists the soccer bonanza will not be affected.

South Africa's booming economy may grow more slowly than the government target of 6%, and some analysts say it is now unlikely to grow by more than 4.5%.

Eskom has asked that South Africa not be promoted as a major investment destination, and plans to spend R300bn ($41.41bn) to boost power generation by 2013.