In the face of a persistent national energy crisis, South Africa’s government has taken a striking step. A 2023 block exemption allowed energy-intensive businesses to collaborate in ways normally forbidden, to share infrastructure, optimise supply and reduce costs — all to keep the lights on and the economy moving.
Now, a critical amendment earlier this month has expanded this lifeline beyond the grid’s constraints to include any “industry in distress”. This shift opens a vital door for sectors buckling under immense economic pressure.
At the forefront stands the ferrochrome industry, a cornerstone of the mining economy now facing an existential threat from soaring energy costs. The ferrochrome sector is the precise “industry in distress” the amended regulations were designed to rescue and leveraging this exemption is not just an opportunity but a necessity for its survival and transition.
The Competition Act allows the minister, after consultation with the Competition Commission, to issue regulations exempting certain agreements from the act to achieve its pro-competitive goals. In 2023, then-minister Ebrahim Patel did just that, creating a block exemption for “energy users”.
This permitted companies in both horizontal and vertical relationships to legally enter agreements that would otherwise be considered anticompetitive, such as market allocation and sharing infrastructure, for the purpose of securing backup power, reducing energy costs and promoting efficient energy use during the electricity supply constraint.
Notably, price-fixing and collusive tendering remained strictly prohibited. The sole purpose was to provide a collaborative toolkit for businesses to survive the energy crisis. Any agreement straying outside this defined scope would not be protected, leaving parties open to prosecution by the Competition Commission.
A crucial evolution occurred on January 5. The department of trade, industry & competition amended the exemption, broadening its scope. Now collaborations are permitted not only to respond to the electricity constraint but also to assist “an industry in distress”.
Furthermore, a pivotal clause was added: subject to the energy regulatory framework, parties may engage in “joint or collective negotiated price agreements ... with energy suppliers to an industry in distress”, provided that such negotiated prices are approved by the National Energy Regulator of South Africa (Nersa). This, in effect, creates a cautiously regulated pathway for collective energy price negotiations, a form of conditional price agreement forbidden by the Competition Act.
The ferrochrome industry is the prime candidate to benefit from this amended exemption.
This amendment arrives as a potential life raft for industries that are drowning under cost pressures. A stark example is the ferrochrome sector. A joint statement last year from the Minerals Council and the Ferro Alloy Producers Association painted a bleak picture: electricity tariffs have skyrocketed by more than 900% since 2008, dealing a “deleterious” blow to the chrome ore industry. With smelters being intensely energy-dependent, this unsustainable cost spiral has all the hallmarks of a genuine “industry in distress” in urgent need of relief.
The ferrochrome industry is the prime candidate to benefit from this amended exemption. The regulation should empower ferrochrome smelters and chrome producers to legally collaborate in transformative ways.
For instance, they could jointly invest in large-scale renewable energy projects, sharing the colossal capital burden to move away from Eskom dependency. They can optimise logistics and share infrastructure at adjacent sites, driving down operational costs. Critically, under Nersa’s oversight they could potentially negotiate collectively with power suppliers to secure a viable, sustainable electricity price, an important step for immediate survival.
The ferrochrome industry, besieged by crippling energy costs, perfectly embodies the “distress” the regulation seeks to address. For this critical sector seizing the exemption is not about avoiding competition but about enabling collective survival and investment in a sustainable future. By collaborating on energy solutions the industry can stabilise itself, protect jobs and fund the renewable energy transition South Africa desperately needs.
The framework is now in place. The industry’s challenge is to use it wisely, transparently, and with urgent collective action to secure its future.
• Tlhong is director corporate commercial at TGR Attorneys.
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