Identifying energy clusters within the gold mining supply chain : implications for energy policy

Abstract

An energy supply shortage has caused major disruptions and has become extremely costly for South Africa. The most significant problem constraining economic growth in the country is inadequate energy supply and maintaining the structural reliability of its energy generation network. Energy is crucial for economic growth and a sufficient energy supply is required to sustain economic growth. The entire country runs on energy in one form or another, either by producing goods or by delivering a service. Gold mining is an important part of South Africa’s economy. Once an energy shortage occurs, mining operations are shut down, which requires numerous hours to start operations again. For example, gold mining activities such as smelters and refineries require several hours to start operations again, which results in a major drop in productivity. Gold mining is the most energy intensive form of mining in South Africa. The gold mining industry uses energy directly on site, as well as indirectly through its supply chain. One way in which to identify these high energy-intensive users is to identify energy clusters in the gold mining supply chain. Once these clusters have been identified, key role-players can engage with these clusters to ensure that energy is used more sparingly and to determine effective ways to reduce energy costs through supply chain engagement. Energy is a necessity in every aspect of the gold mining sector and the gold mining supply chain. Given the complexity of modern supply chains, it is not a trivial task to identify a group of closely connected energy users in the gold mining supply chain, whose interactions largely shape the problem of an energy intensive sector within an environment of energy constraints. An increase in the number of energy intensive sectors has a harmful impact on both the environment and the economy. The environment is also negatively affected by an increase in the volume of CO2 emissions. The economy tends to be less profitable and competitive due to the higher costs. Energy policies should focus on promoting and improving energy efficiency in the high-consuming sectors. Therefore, identifying energy-intensive clusters in the gold mining supply chain is essential to design effective energy policies. This paper investigates the energy-intensive clusters in the gold mining supply chain, as well as what the implications of this energy-intensive cluster are on energy policies in South Africa. The focus was to review the energy sector and the policies set out by the Department of Energy. The gold sector performance, beneficiation, and its supply chain are further analysed. The aim is to decrease South Africa’s energy intensity. High-energy intensity leads to high costs and natural resource depletion that affect the entire economy. The point of departure in this dissertation is to elaborate on the current energy supply predicaments facing the country. It is evident that in this dissertation the emphasis is on the energy intensity of the gold mining supply chain. The gold mining sector and its supply chain form energy clusters with high-energy intensity. Some analyses are performed to provide evidence that these energy-intensive clusters are identified in the empirical analysis through merging the input-output (2011) tables with the network partition approach. Therefore, the empirical analysis consists of three components: a simplified input-output approach, the network partition approach, and a non-systematic matrix approach. From the results, seven energy-intensive clusters are identified, ranking from the highest within cluster effect to the lowest. From the results, the highest energy using sectors in the gold mining supply chain are identified. The energy-intensive clusters within the gold mining supply chain may help to identify the broader economic implications for energy usage, which may be of strategic importance for energy policy. This dissertation concludes with policy recommendations to not only enhance the use of renewables, but also to implement strategies to assist energy-intensive users to be more energy efficient, which will ultimately reduce energy consumption. These recommendations also seek to inform on the broader economic implications of the Department of Energy and Eskom’s current energy policies. Further studies regarding energy intensity in the gold mining supply chain are required. Despite these limitations, the research still aims to make a significant contribution to the knowledge on the topic