SA policymakers have spoken repeatedly about the importance of local beneficiation of our minerals. It’s a favourite topic when they promise to create jobs.
Unfortunately, the actions of politicians are not always aligned with their good policy intentions. While they talked, SA deindustrialised and jobs vanished.
One of the reasons for the decline in local beneficiation is the fall of Eskom’s capacity and efficiency. The current management is trying to reverse this against difficult odds.
The Energy Institute’s 2025 report says SA produces less power now than a decade ago. Power generation has declined at an average rate of 0.8% a year.
Eskom’s annual reports show it has been offsetting its decreasing production and sales volumes by double-digit tariff hikes. Its cost structure — from financing to employees — has increased even as production and sales have declined. This costly inefficacy has been passed on to the economy, with negative consequences for beneficiation.
In its 2024 annual report Eskom stated that its revenue increased by R36.3bn to R295.8bn, mainly due to the standard tariff increase of 18.7% allowed by the National Energy Regulator of SA. The tariff helped offset a year-on-year decline in total sales volumes of 5,090GWh.
With an average price of electricity sitting at 165.43c/kWh, our price level is still better than Germany’s. But it’s nonetheless not competitive.
Government’s leadership has over the years allowed Eskom to deviate from its original mission to power SA’s industrialisation. The evidence of this deviation, made worse by load-shedding, is in the loss of competitiveness of energy-intensive manufacturing industries and the resultant destruction of value chains.
The future of ArcelorMittal SA, once a competitive manufacturer of crude steel, hangs in a balance. Metalloys, once one of the world’s largest manganese smelters, stopped producing. Assmang, an SA company, decided to build a ferromanganese smelter in Malaysia to access cheap, reliable power. And now ferrochrome smelters are shutting down.
China has moved in the opposite direction. It has doubled down on power generation capacity in all energy sources: from fossil fuels to renewables. It seeks to keep its industrial capacity going even when it is accused by trading partners of overcapacity.
Lu Feng, a Chinese intellectual at Peking University, was quoted in an interview published by Sinification saying the government learnt the hard way when its attempts to transition from traditional industrial base to a services economy backfired. It led to restrictions in industrial output and power outages.
Learning from this experience, China has dumped the binary thinking and adopted the principle of ‘establishing before breaking’.
Learning from this experience, China has dumped the binary thinking and adopted the principle of “establishing before breaking”. In other words, the traditional industrial base, including energy generation and all associated industries, will not be broken until an alternative has been established, tried and tested.
More importantly, Lu says, no country has ever jumped into new industries without fully established traditional industrial base. The US and Japan first manufactured products invented elsewhere before undergoing the process of scientific innovation.
In addition to Eskom’s mismanagement in the past, SA policymakers mistakenly adopted the binary “either coal or renewables” mentality, resulting in uncertainty and negative impact on reliability of coal plants.
By allowing smelters — part of the traditional power base — to collapse due to costly energy supply, we are eliminating the stepping stone to the next stage of scientific innovation.
This would be tragic because we are endowed with a diverse set of minerals: iron ore, manganese, chrome, platinum group metals, coal and others. This comparative advantage should help us bolster local beneficiation, because unlike China and India we can save on import costs and the logistics of shipping ore to distant factories.
However, the comparative advantage is nullified not only by expensive, unreliable power, but also by inefficient domestic logistics services. The need for Eskom and Transnet to rediscover their competitiveness cannot be emphasised enough.
Policy choices
In my interactions with global industry players at a European ferroalloys conference in May I got the impression that two things concerned many of them: energy costs and geopolitics. While the two affect each other, a country can have a certain level of control on energy costs. It’s about policy choices.
After all the talk by government officials, there seems to be some movement in the right direction. In the first half of this year mineral & petroleum resources minister Gwede Mantashe published a metals strategy, including critical minerals, that emphasises the importance of local beneficiation.
“SA can leverage its mineral reserves, mining capability, mineral processing capability, refining capability, precursor processing expertise as well as future demand of critical minerals,” the document reads.
Recently, the cabinet announced that Eskom would be directed to negotiate prices with smelters to keep them competitive. And electricity minister Kgosientsho Ramokgopa has indicated that he and trade, industry & competition ministers Parks Tau are finalising the details.
It seems we have moved, albeit slowly, from rhetoric to actual policymaking to save our industrial capacity. We must move faster from policy to implementation.
• Bayoglu is MD of private investment company Menar. The company has invested in the acquisition of manganese smelter Metalloys, which has since been renamed Khwelamet.
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