The looming expiry of Mozal’s electricity tariff agreement in March is not merely an operational issue for a single aluminium smelter in Mozambique.
It is a warning signal for South Africa’s broader industrial and trade policy, and a stark illustration of how electricity pricing has become a binding constraint on competitiveness, beneficiation and job creation.
Mozal anchors an extensive regional value chain, supporting about 22,000 downstream jobs in South Africa across fabrication, logistics, engineering and export-oriented manufacturing.
Allowing such a strategic industrial asset to be mothballed would accelerate de-industrialisation and further weaken an economy already struggling with dangerously high unemployment.
It is the antithesis of government of national unity (GNU) objectives, which, among other things, include rejuvenating the economy and expanding access to most deserving South Africans. Poor South Africans will benefit, and several households will be saved from destitution and dependency on the state, if Mozal is allowed to continue to operate.
Urgent intervention is therefore required to secure a short-term, affordable electricity tariff that allows Mozal to avoid shutting down. However, emergency negotiations alone are not a strategy. South Africa should accept its responsibility as the bedrock upon which the regional economy is anchored.
Any interim tariff arrangement must be transparent, time-bound and conditional, explicitly linked to job retention, continued production and downstream supply commitments. Industrial support must deliver measurable trade and employment outcomes, not open-ended concessions.
Deeper failure
The Mozal case exposes a deeper, recurring failure of government to identify trade opportunities that have serious potential to relieve some challenges. South Africa’s electricity pricing regime shifts the costs of Eskom’s inefficiencies, losses, theft and non-payment onto productive industries. The results are catastrophic.
Above-inflation tariff hikes may stabilise Eskom’s balance sheet in the short term, but they steadily erode the industrial competitiveness of South Africa and the region, undermine export margins and drive firms out of the economy. For small, micro and macro enterprises the impact is unimaginably harsh.
From a trade and industrial policy perspective, this approach is self-defeating. No localisation strategy, beneficiation plan or export incentive can succeed if energy-intensive manufacturers face input costs that exceed global benchmarks.
Electricity is not merely a utility; it is a core industrial input. When it becomes unaffordable or unreliable, industrial policy collapses in practice, regardless of intent.
If South Africa is serious about rebuilding its industrial base, electricity reform must be treated as an industrial policy priority.
Municipal electricity dysfunction further compounds this crisis. Unreliable supply, rising debt to Eskom and political tolerance of nonpayment directly disrupts industrial activity, particularly in industrial zones and logistics corridors. These failures impose hidden costs on manufacturers and discourage new investment. The manifest cost is the number of unemployed people on the streets.
If South Africa is serious about rebuilding its industrial base, electricity reform must be treated as an industrial policy priority. This requires accelerating access to alternative and private generation, expanding wheeling arrangements, strengthening transmission capacity, and restoring payment discipline across the system so that productive industry is no longer forced to subsidise systemic failure.
Saving Mozal in the short term is necessary. However, preventing the next Mozal crisis also demands structural reform. Without affordable, reliable electricity, South Africa will continue to lose strategic industries, weaken its trade balance and sacrifice thousands of industrial jobs. Industrial competitiveness cannot be negotiated deal by deal; it must be built into the system.
As the Chinese aptly say, the best time to plant a tree was 20 years ago; the next best time is now.
Boshoff chairs the National Council of Provinces’ select committee on economic development & trade.
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