The government will allow companies in the alloy and ferrochrome industries to negotiate electricity prices to promote beneficiation in those energy intense sectors and boost the economy.
Electricity & energy minister Kgosientsho Ramokgopa told MPs in the National Assembly on Wednesday the industries were heavily reliant on electricity and needed discounts to make their products more cost-competitive and to ensure their long-term sustainability.
Responding to a question by ANC MP Fasiha Hassan about measures to ensure energy security and pricing for ailing steelmaker ArcelorMittal SA (Amsa) to improve its competitiveness and ensure its continued operation, Ramokgopa said the pricing dispensation was not specifically directed at Amsa.
He said the government would start with the alloys industry because electricity accounted for more than 70% of its operational costs. The ferrochrome industry was also targeted because companies had been forced to close smelters because high power costs had rendered their finished products uncompetitive.
Further details would follow and trade, industry & competition minister Parks Tau would introduce the specific policy instruments to support the new dispensation, Ramokgopa said.
Beneficiation
The initiative would also feed into the government’s focus on increasing the beneficiation of minerals, he said.
“We are serious about decisively intervening in the economy and getting it on a proper growth path. We are not subsidising the smelters. We are protecting the jobs, we are growing the SA economy and so we can do beneficiation.”
Ramokgopa said the government and Eskom were aware that the opening of more smelters would require increased generation capacity, For example, a further 10 smelters would require 4000MW of additional energy.
DA MP Kevin Mileham questioned whether the new policy was not merely a repeat of a 10-year deal Eskom extended to South32’s Hillside aluminium smelter in 2021 that would reportedly save South32 tens of billions of rand in power costs.
Ramokgopa stressed that the industry would be under an obligation to be efficient producers to get government support. “It’s not a blank cheque,” he said, noting that some producers were using antiquated and energy inefficient technology.
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