The government is preparing to deploy sovereign backing to rescue the struggling ferrochrome industry with electricity minister Kgosientsho Ramokgopa finalising a package with finance minister Enoch Godongwana that would help reduce power tariffs for energy-intensive smelters and restore the sector’s competitiveness.
The package under negotiation includes electricity pricing reforms, reopening mothballed furnaces, and potential fiscal guarantees. Ramokgopa said that Eskom cannot shoulder the costs alone.
“Some of these interventions will have a fiscal implication,” he said. “It’s not an Eskom problem. Now it’s a sovereign problem,” he told Business Day.
Eskom this week signed a memorandum of understanding (MoU) with leading ferrochrome producers Samancor Chrome and Glencore–Merafe Chrome Venture to supply dedicated electricity from ring-fenced capacity, under a contract aimed at halving power costs and sustaining up to 12 furnaces.
The ferrochrome industry, historically one of the country’s major value-added mineral exporters, has been battered by high electricity costs, production curtailments and competition from China.
Ramokgopa said Chinese furnaces pay about 62c per kilowatt-hour for power, compared with South Africa’s 135c. The government aims to narrow that gap, allowing chrome ore to be processed domestically instead of shipped abroad.
“We have found the path to getting closer to 62c,” he said, confirming the talks between his department and the National Treasury.
“I’m concluding a discussion with the minister of finance because some of these interventions will have fiscal implications and will not be carried only by the Eskom balance sheet because there are issues of solvency, cash flow issues that need to be resolved there,” Ramokgopa said.
“I’m more than confident that before the end of January we should have found each other and made a proper announcement,” he said.
Ramokgopa said the MoU initiative will extend beyond early movers such as Samancor and Glencore’s operations.
“Whatever solution we get for these smelters, we will extend it to everyone in the space,” he said.
Whatever solution we get for these smelters, we will extend it to everyone in the space.
— Kgosientsho Ramokgopa, electricity minister
While officials are working through several design scenarios, Ramokgopa said the measures will ultimately recover upfront support through increased industrial output.
“We are confident that the many smelters that are on maintenance will be reopened on the back of this agreement,” he said.
“We will not overbalance the fiscus. The fiscus is not in the position to do that.”
Ramokgopa said the initiative to drive South Africa’s broader energy transition strategy includes ongoing reforms to unbundle Eskom and create an independent transmission system operator by 2029. Stable and affordable power supply, he said, is critical to unlocking mineral beneficiation and decarbonisation opportunities as global demand for battery and green-industrial materials rises.
South Africa holds some of the world’s largest chrome reserves and has long been a crucial supplier to global stainless steel producers. Yet rising electricity tariffs and years of load-shedding have eroded competitiveness, shifting more of the chrome value chain to Asia.
Earlier this week, Numsa held a march regarding job losses in the chrome sector over the past year.
“By December 31 Glencore will have cut 2,000 jobs; Almar Investments has retrenched over 538 workers, and Samancor has issued a section 189 notice where it states that it is contemplating retrenching 5,000 workers,” Numsa spokesperson Phakamile Hlubi-Majola said.
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