Government has just weeks, if not days, to save the last remnants of what was once a powerful symbol of SA’s industrial muscle.
Samancor, the chrome ore mining and smelting group now majority-owned by China’s Baosteel, has warned employees it “cannot sustain” its remaining two operational smelter furnaces unless it gets cheaper electricity from Eskom.
At the start of ANC industrial policymaking in 1994 there were more than 50 ferrochrome smelters in the country, largely tied to mines owned by the same companies, but the drop-off, mainly due to relentless Eskom tariff increases, has become a rout. We hold more than 80% of global chrome reserves and our smelting capacity once put us at the centre of the world’s manufacture of stainless steel, of which ferrochrome is a core ingredient.
But in the last 15 years the smelters have closed, and that capacity has moved to Asia, mainly China. In plain sight, and in direct conflict with repeated ANC policy to process our minerals here to create jobs and add value to our exports, an entire industry may be about to breathe its last. We will continue to mine chrome ore, but it is increasingly being loaded onto ships as unprocessed rock and exported.
At the heart of it is hubris and incompetence in government, and it has only in the past few months woken up to the threat. In June it said it would intervene in the gathering crisis. Electricity minister Kgosientsho Ramokgopa said remaining smelters would be granted a discounted power tariff. But nothing happened.
Last month the ANC launched a 10-point plan to revive the economy, but again, nothing has happened. Tomorrow Samancor will meet employees to discuss their fate, according to a News24 report.
In the face of this, the government reveals how inept it is. The departments of electricity, mineral & petroleum resources and trade, industry & competition are all involved but seem incapable of coordinated action. In the last five years not one of them has lifted a finger to help the industry. More recently, Parks Tau at trade & industry suggested an export tax on raw chromite exports, then Gwede Mantashe at minerals said no, that was too blunt.
And poor Ramokgopa has an even more intractable problem — can Eskom actually supply sufficient electricity not just to Samancor’s last two operating smelters but also to power up a revival of other mothballed furnaces? Because that would be the plan.
In the absence of any progress, there really only seems to be one last resort. It is asking a lot, but President Cyril Ramaphosa may be the only one capable now of rescuing ferrochrome, if indeed it has not already passed the point of no return.
If he takes the problem into the presidency there’s no time for committees and progress reports and consultants. He simply has to instruct Eskom to cut its tariffs to the chrome smelters in half. On, like, Monday. And even that raises other questions about the competitive electricity market his so-called economic reforms are supposed to be bringing about. Is it only Eskom that has to provide the cut-price power to chrome, or will new private sector generators have to share in the pain as well?
This crisis has been a long time coming as the ANC tries to make its core political function — to “give effect to the mandate... to fundamentally transform our economy” — and somehow simultaneously grow the economy. So uselessly has it implemented BEE and localisation policies that on almost every economic metric that matters here — growth, inequality, employment and even life expectancy — we are worse off today than ever.
The only fix now, for chrome processing at least, is actual action. Heaven help us.
• Bruce is a former editor of Business Day and the Financial Mail.
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