Electricity & energy minister Kgosientsho Ramokgopa said SA’s high energy costs have become untenable, threatening the very existence of smelters that have been shedding jobs at an alarming rate.
Ramokgopa was addressing parliament on the R54bn Nersa blunder that will see consumers pay more for electricity.
“We are on a robust process on how we reduce electricity prices. We also want to democratise the conversation. Most of the cost emanates from primary energy costs. We need to resolve that,” Ramokgopa said.
“We can’t wait for 10 years [when renewable energy is expected to bring down costs of primary energy]. We need to make an intervention now because [the] industry is suffering. Even with the dispensation of negotiated price agreements, I think we can still do better,” he said.
“Smelters are closing in their numbers. Industry is becoming more and more uncompetitive. So we are stunting the growth of the SA economy as a result of energy prices that are runaway prices…. we have come to appreciate the impact of high energy costs.”
Merafe Resources last week said it had begun a retrenchment consultation process with employees at its Boshoek and Wonderkop smelters in the North West, indicating that closures are on the horizon.
Thousands of jobs and billions of rand of export earnings are on the line if the smelters, suspended earlier this year due largely to unsustainable electricity costs, are closed down.
The smelters are owned by the Merafe-Glencore joint venture, which has already closed 10 of its 22 furnaces over the past four years, resulting in the loss of 1,800 jobs.
Earlier this year, Glencore said high electricity prices had made it more viable to export raw chrome ore out of SA than to smelt it into ferrochrome locally. The joint venture produces about 2.3-million tonnes of ferrochrome a year, or about a third of SA’s annual exports of the ferroalloy.
Main points:
- Kgosientsho Ramokgopa acknowledges high electricity costs are a threat to SA's smelters and economy.
- Smelters, like those owned by Merafe Resources, are facing closures and retrenchments due to unsustainable energy prices.
- Merafe-Glencore joint venture has already shut down 10 of its 22 furnaces, leading to the loss of 1,800 jobs.
- The government is exploring ways to reduce electricity prices and democratise the conversation around energy costs.
- Ramokgopa has committed to allowing industries like alloy and ferrochrome to negotiate electricity prices to promote economic growth.
- Smelters like South32's Hillside have received confidential electricity discounts, highlighting ongoing energy cost concerns.
- The government aims to address these issues swiftly, with further policy details expected from minister Parks Tau.
Merafe said the venture was also rethinking operations at its Rustenburg and Lydenburg smelters, which have already been placed on care and maintenance, and was looking for ways to “streamline opportunities within the mining division”.
South32’s Hillside smelter in Richards Bay made headlines earlier this year when Open Secrets reported that the operation had received a significant, confidential discount on its electricity bill from Eskom, resulting in savings of R92bn over the preceding decade.
Industry is still waiting for progress on Ramokgopa’s undertaking in June that the government would allow companies in the alloy and ferrochrome industries to negotiate electricity prices to promote beneficiation in those energy-intensive sectors and boost the economy.
Ramokgopa told MPs in June that the government would start with the alloys industry because electricity accounted for more than 70% of its operational costs, that further details would follow and that trade, industry & competition minister Parks Tau would introduce the specific policy instruments to support the new dispensation.
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