Trade, industry & competition minister Parks Tau has thrown a lifeline to the country’s ferrochrome and steel industries that could also save thousands of jobs in the embattled sectors as the government steps up its interventionist efforts to save industries on the verge of collapse due to high energy costs.
In a government notice published on Monday evening, Tau amended the 2023 block exemption from certain sections of the Competition Act applicable to qualifying energy users to include industries “in distress” due to persisting “macro-economic challenges”.
The ferrochrome industry’s woes are well-documented, with several smelters already shut down and more on the block. The steel industry is also on the ropes due largely to high energy costs.
Struggling steel producer ArcelorMittal South Africa (Amsa) forked out more than R3.2bn to Eskom for power in its 2024 financial year — more than half of what it paid its almost 9,000-strong workforce
The cost of electricity in South Africa has rocketed more than 800% since 2007.
It is also damaging the country’s mining industry, which accounts for about 8% of GDP, according to a study by Boston Consulting Group. The study found that South Africa’s energy costs are the fourth-highest among similar mining jurisdictions.
The country’s ability to beneficiate chrome ore into ferrochrome — an indispensable metal in the production of stainless steel — has all but ended, costing the fiscus billions of rand in lost revenue, with thousands of jobs.
Read: SA chrome producers seek ‘beneficiation roadmap’ over export tax
South Africa has the world’s biggest chrome ore reserves but it has surrendered its competitive advantage to China, which has taken the leading role in the beneficiation process.
The block exemptions allow energy users to collaborate on securing back-up or alternative energy supplies, and to partner in reducing energy costs and securing adjacent or shared sites, infrastructure and facilities.
These will include “joint negotiation and purchase of energy and related product and service supply, including purchase agreements”, the notice states.
However, the energy users are not exempt from the prohibition on price fixing for sales of goods or services to customers or consumers, engaging in collusive tendering, or from practising resale price maintenance.
According to the notice, an industry in distress is “an industry determined by the department, for the purposes of these regulations, on a case-by-case basis after consultation with the energy regulator as being in distress, by considering inter alia, whether the industry is experiencing a substantial exit by firms resulting in industrywide job losses due to macroeconomic challenges facing the South African economy”.
The department has increasingly turned to block exemptions in the past two years to make selected industries, such as logistics, ports and healthcare, more competitive.
The troubled chrome industry, identified by the government as a vital sector, has also received particular attention across sister departments, including energy & mineral resources.
The National Energy Regulator of South Africa is fast-tracking Eskom’s application to reduce the negotiated pricing agreements applicable to Samancor Chrome and the Glencore-Merafe Chrome Venture in a last-ditch effort to save the country’s ferrochrome industry.
The regulator will hold public hearings in the next two weeks as required by law. A decision is set to be made in the first quarter of the year.
Tau in October last year followed through on a June cabinet decision to regulate exports of chrome as part of measures designed to clamp down on illicit trade in the critical mineral.
He placed chrome ore under export control by the International Trade Administration Commission of SA (Itac), stating in a government notice that the move is part of measures “designed to improve the long-term viability and competitiveness of the chrome value chain”.
Based on the system, exporters are required to apply to the commission for an export permit before shipping any chrome ore.
Business Day reported last year that the industry has been pushing for the government to regulate chrome exports due to estimates that illegally mined chrome accounts for 10% of all the mineral extracted locally.
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