WRAPUP 2-SAfrica mining faces strain, power still a worry

* Global downturn dents metal prices

* SAfrica power supply still vulnerable

* State budget cannot pay for Eskom's expansion

(Wraps public enterprises minister's comments)

By Wendell Roelf

CAPE TOWN, June 23 (Reuters) - South Africa's mining industry has been hard hit by sharply lower commodity prices due to the global economic downturn and is under a "severe strain", Minister of Mineral Resources Susan Shabangu said on Tuesday.

Analysts had forecast the sector could lose more than 100,000 jobs this year owing to the crisis, but Shabangu told parliament a government-led process to save jobs had paid off.

"The mining sector is under severe strain, but we have sown the seeds of a resilient economy," Shabangu said during a budget vote session for various ministries.

"The aggregated commodity prices of minerals produced in the country lost some 40 percent of its value, while job losses were constrained to less than 25,000, representing about 5 percent of the total employment in the industry," she said.

Shabangu said she was keenly following consolidation in the mining sector. Before her speech to parliament, she told reporters the government opposed a possible merger between Xstrata (XTA.L) and Anglo American Plc (AAL.L). [ID:nWEA7861]

"We are keenly watching these developments to ensure, among others, that such consolidation does not take us back to the age of anti-competitive practices, that there are no job losses and to ensure that it does not affect market principles," she said.

Anglo rejected Xstrata's approach on Monday. [ID:nLM97031]

POWER SHORTAGE

Shabangu's cabinet counterpart Dipuo Peters, who heads the energy ministry, said an internal threat to the country's mines still existed because it was battling an energy crunch.

Peters, who also spoke in parliament, said power supply was still vulnerable, but the global downturn had eased electricity demand and helped Africa's biggest economy cope.

The country, which is the world's top producer of platinum and a major source of gold has been hit by power rationing since January last year when the national grid nearly collapsed, forcing mines and smelters to shut for days.

"We are far from being out of the woods. In fact, was it not for the economic downturn, we would be load-shedding," Peters told parliament during her budget vote speech on Tuesday.

Peters said the country had the potential to save up to 30 percent in power use through energy efficiency.

State-owned utility Eskom [ESCJ.UL], which supplies some 95 percent of the country's power, plans to spend 385 billion rand ($47.30 billion) in new capacity over five years.

Public Enterprises Minister Barbara Hogan, who oversees state firms, said South Africa's national budget cannot pay for Eskom's expansion, while the nation's low electricity tariffs were unattractive to private power producers, who could chip in to help plug the ongoing power shortage.

She said any funding shortfall not provided by additional government funding or through electricity tariffs would result in the curtailment of projects.

"Given the scale of the investment programmes, it is unlikely that the fiscus (budget) will be able to fund the costs of the capital build," she told parliament. (Editing by James Jukwey)