SA sits on more than 70% of the world’s chrome ore reserves. Yet we persist with exporting the raw ingredient that could, and should, underpin a booming downstream industry.
Stripped of its potential value and shipped overseas, our chrome becomes someone else’s profit, while we’re left counting the cost. About 2.7-million tonnes are mined or diverted illegally each year, and an estimated R7.5bn in lost beneficiation gains.
This is a self-inflicted wound. Every unprocessed tonne we let sail out of our ports is a missed opportunity for jobs, skills development and industrial growth. Ferrochrome, made from chrome ore, is the beating heart of stainless steel production. It commands a premium price, sustains smelters in Mpumalanga and Limpopo and supports thousands of families. But we send the ore away and wonder why our furnaces lie cold, our workers idle and our towns hollowed out.
The incentives driving illegal miners and smugglers are rational. With chrome ore convertible into high-value ferrochrome, the margins for those willing to flout the law are enormous. Weak export controls and lethargic bureaucracy have created a black market bonanza. The cabinet approved export permit regulations months ago. The government gazette is still blank. It is in that policy vacuum that illegal miners and smugglers feast, depriving the state of revenue, the sector of legitimacy and ordinary South Africans of hope.
Add skyrocketing energy costs to the mix, and you’re left with idle smelting capacity and declining beneficiation. Since 2005, electricity tariffs have risen sharply, pushing energy-intensive smelters to the brink. Smelting ferrochrome consumes about 2,800 kWh per tonne of metal produced, making affordable, predictable power a make-or-break input.
The combination of punitive tariffs and chronic load management has forced major operators to idle furnaces. For one thing, A joint venture between Glencore and Merafe, historically a core domestic producer of ferrochrome, has at times had no smelters running.
“We had numerous manganese smelters in SA, but today we only have one still operating: Trans Alloys. If you look at ferrochrome, we have 22 furnaces, but when we closed down Lydenburg and Rustenburg smelters, we lost a lot of capacity. Currently, we only have 12 furnaces available, but none of them are operating,” said Japie Fullard, CEO of Glencore Alloys, one of the largest chrome producers in the world.
“This is the first time in the history of Glencore and Merafe’s existence that we don’t have one smelter running. I can tell you now that in the absence of any solution, even Lion Smelter is under pressure.”
The fix is trivial on paper. First, Parks Tau, minister of trade, industry & competition, must publish the notice to bring chrome under the International Trade Administration Commission’s remit. A robust digital registry and enforceable permitting will choke off the illicit trade. Second, we need urgent electricity relief for smelters, whether through special economic zones, ring-fenced supply agreements or targeted subsidies, to make beneficiation commercially viable again. Itac permits are useless if no-one can afford to flick the switch.
Chrome reserves are strategic assets, as the National Energy Regulator of SA said in its decision to approve Eskom’s request for a temporary tweak to the take-or-pay clause in its long-term power contract with Samancor and Glencore-Merafe JV.
They are not a raw commodity giveaway. If we fail to add value at home, we resign ourselves to always being the quarrymen. We must act on regulation and energy relief if we want beneficiation. Anything less leaves the country digging its own grave while exporters keep filling their pockets.
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