To invest in sub-Saharan Africa, one of the biggest problems facing mining companies is access to electricity. In this region, most countries are already unable to meet household needs.

This situation has often forced mining companies to choose the least risky but most expensive option: installing their own sources of supply. In this context, the World Bank recommends, for certain countries, the integration of mining companies in the implementation of national energy development policies. Arguments.

Gigantic needs

In South Africa, the continent's second largest economy behind Nigeria, one of the sectors most affected by the crisis that the national electricity company, Eskom, has been going through for several months is the mining industry.

For good reason, the mines consume almost a third of the energy distributed in the country by the national company, which is nevertheless one of the world's top 7 electricity companies in terms of production.

Thus, when Eskom proposed at the beginning of the year to increase electricity prices, mining players stepped up to show how this would compromise the already uncertain future of the sector. Drop in production and loss of 150,000 jobs were the main arguments put forward by the mining industry to justify its position.

For good reason, the mines consume almost a third of the energy distributed in the country by the national company, which is nevertheless one of the world's top 7 electricity companies in terms of production.

The same scenario occurred in 2017 in Zambia when the state decided to increase electricity prices. Some mining companies, including giants like Glencore or First Quantum Minerals, have refused to comply. A standoff ensued between the government and the mining industry which resulted in the suspension of several operations.

The dispute was finally settled on a case-by-case basis, after several days of negotiations, but the few weeks of energy restrictions suffered by the mining companies did not fail to affect the total volume of copper produced by the country. .

According to World Bank forecasts from 2015, the energy needs of mines in sub-Saharan Africa will continue to increase to reach 23 GW by 2020.

These two cases, far from being isolated examples, demonstrate the sensitive nature of the issue of access to electricity for mining companies. In general, the energy cost accounts for 10 to 35% of the development cost of a mining project.

According to World Bank forecasts from 2015, the energy needs of mines in sub-Saharan Africa will continue to increase to reach 23 GW by 2020.

Demand will come mainly from South Africa, but also from countries such as Zambia and Mozambique, followed by countries in Central and West Africa. Better still, in some countries, the electricity demand of the mining industry will dominate that of all other sectors.

A context of chronic energy deficit

For African countries south of the Sahara, access to electricity is a thorny problem that does not date from today. Between insufficient production capacity, weak connectivity, lack of reliability and high costs, these nations face chronic problems. However, the energy potential of the region has already been demonstrated by several studies and research.

For example, only 8% of the continent's hydroelectric potential (about 400 GW) has been exploited. Gas resources can enable sub-Saharan Africa to produce 100 GW each year for more than 70 years. To this must be added the vast resources of coal, but also other sources of electricity, including renewable energies.

Despite this great potential, some 600 million Africans still lack an electricity connection, according to data from an AfDB report published in September 2019.

In some sub-Saharan African countries, the number of people with access to electricity does not exceed 10% of the population.

Based on older forecasts from the International Energy Agency, cited by the British NGO Oxfam, in a study carried out in 2017, 489 million people will still not have access to electricity. in 2040.

“It is important to remember that regional and national averages can obscure vast disparities in levels of energy access between and within countries,” the organization says, noting that in some African countries sub-Saharan, the number of people with access to electricity does not exceed 10% of the population.

The energy production capacity currently installed in sub-Saharan Africa would barely exceed 80 GW, including more than 40 GW in South Africa. Nigeria, whose population is more than three times that of South Africa, has only a tenth of its installed generation capacity.

Moreover, in particularly mineral-rich countries such as Guinea, Mauritania, Mozambique, DRC, Tanzania and Zambia, electrification rates barely exceed 20-30%.

Methods of supplying electricity to mines

To meet their energy needs, several options are available to mining companies. In general, they opt for connection to the network. However, this mode of supply has several limitations, including security and high tariffs when the network is supplied by expensive fuel-based generation.

In a context where the networks are not even able to meet the needs of the populations, the mining companies are increasingly beginning to opt for self-supply.

In a context where the networks are not even able to meet the needs of the populations, the mining companies are increasingly beginning to opt for self-supply.

This option, in addition to eliminating reliability risks, allows them to set up their own production plant, depending on the needs of their projects. From 6% of mining projects using self-supply before 2000 in sub-Saharan Africa, we should increase to 18% in 2020, despite the relatively very high costs.

“It should be noted that mines attach at least as much importance to security of supply as to cost. They invest in self-supply, even when the cost per kilowatt delivered is much higher, in order to retain control of their electricity supply and ensure continuity,” explains World Bank research on the subject. .

Between connection to national networks and self-supply, there are several intermediate options, depending on the typology carried out by the institution. If still used on a small scale, some of these intermediate options offer the advantage of taking local populations into account (see Table). Indeed, on the basis of agreements, often private, the mining companies invest in the national networks or transfer the rest of the capacity of their own production infrastructures to the networks.

How mines can contribute to the development of the energy sector

In its report entitled "The Transformative Potential of Mining: An Opportunity for the Electrification of Sub-Saharan Africa", the World Bank indicates that self-supply represents losses for the economy, public energy companies, but also for mining.

“If mines move away from self-supply, utilities and the population will also benefit, and new opportunities will also emerge for the private sector,” the document reads.

The institution thus proposes that the mining sector serve as an anchor point for demand in local electrification projects in mineral-rich countries. Mining companies are thus encouraged to invest with governments, directly in the production and transmission of electricity or in independent production companies for which they will serve as main buyers.

This scenario would save them hundreds of millions of dollars and help supply local communities.

Mining companies are thus encouraged to invest with governments, directly in the production and transmission of electricity or in independent production companies.

In Guinea or Mauritania, for example, where several scenarios were simulated, it turns out that the supply shared by several mines and the supply shared by the mines and the neighboring communities are the most profitable and beneficial options for all stakeholders.

In the case of Guinea, energy-mining integration has the capacity to connect about 5% of the population to the electrification network. This rate is 4% for Mauritania.

In the case of Guinea, energy-mining integration has the capacity to connect about 5% of the population to the electrification network. This rate is 4% for Mauritania.

However, this integration presents several technical and financial constraints. First, the great risk that close cooperation with public companies represents for mining companies. Indeed, several public energy companies regularly experience financial difficulties.

This is the case of Tanesco (Tanzania), Eskom (South Africa), but also in countries like the DRC or Zambia.

A political will

There is no doubt that closer cooperation between the mining industry and the public sector on energy, despite the risks, has enormous potential for countries in sub-Saharan Africa.

The potential is all the greater when we know that the region hosts a significant part of the world's reserves of strategic raw materials. By way of illustration, in the 48 countries of sub-Saharan Africa, several are among the world's largest producers of gold (Ghana, Sudan, South Africa, Mali, Tanzania, Côte d'Ivoire or even Burkina Faso).

The DRC is the world's largest cobalt producer, and along with Zambia, one of the largest copper producers. Add to this the concentration of world reserves of platinum group metals in South Africa, but also the continent's great wealth in uranium, bauxite and coal.

In most of the aforementioned countries, the mining industry is one of the largest contributors to exports, tax revenues and gross domestic product (GDP), but benefits very little to the people themselves. The populations of these nations are among the poorest in the world.

To reverse this trend and realize the potential of this mineral wealth for electrification, African states would already have to show the will by starting by integrating the needs of the mining sector into their energy roadmaps. Currently, Tanzania is one of the few countries to do so on the continent.

Then, the establishment of a framework for dialogue and work on the issue would reassure mining companies and encourage them to invest directly in the production and transmission of electricity or become reference customers for private independent producers.

The establishment of a framework for dialogue and work on the issue would reassure mining companies and encourage them to invest directly in the production and transmission of electricity or become reference customers for independent private producers.

One thing is certain, to meet the energy challenge, sub-Saharan Africa must mobilize all the resources available to it. Otherwise, hundreds of millions of people will still not have access to electricity in the coming decades, and African economies will still not be able to find their place on the world stage.