The government is hoping to keep smelters alive and save thousands of jobs through its efforts at getting power costs lowered.
The department of trade, industry & competition’s (DTIC) gazetting of block exemptions last week is aimed at allowing firms operating in “industries in distress” to collectively plan and agree on a negotiated pricing agreement (NPA) with Eskom to reduce energy costs without contravening the Competition Act.
“The exemption was triggered by, among other factors, job losses in distressed industries which include the wide-scale closure of smelters due to, inter alia, high energy costs,” said Kaamil Alli, spokesperson for trade, industry & competition minister Parks Tau.
The exemption is in line with other governmental initiatives to preserve local industrial capacity and employment.
Local electricity tariffs have escalated more than 900% since 2008, rendering ferrochrome producers uncompetitive and triggering job cuts.
“The South African economy has been facing deindustrialisation, partly exemplified in a number of ferrochrome smelters closing down. Part of the reason is the high cost of energy,” Alli said.
Tau, in consultation with energy minister Kgosientsho Ramokgopa, has agreed to a programme of action to arrest this trend and support industries to recover.
“This tool we hope will save the jobs currently at risk and hopefully stimulate the industry to enhance job creation,” Alli said.
This tool we hope will save the jobs currently at risk and hopefully stimulate the industry to enhance job creation
The exemption paves the way for companies to collectively purchase energy, secure backup or alternative energy supply, reduce energy costs, and promote the optimisation and efficient use of energy supply.
“The NPA will allow large, energy-intensive customers (such as smelters) to obtain discounted electricity tariffs in order to remain globally competitive and avoid closure.”
In a push to arrest the closure of smelters Eskom penned a memorandum of agreement with Samancor Chrome and the Glencore-Merafe Venture to provide globally competitive tariff structures to support production and protect jobs.
South African ferrochrome production has fallen as smelters shut down due to high power costs and plummeting prices. The smelters have approached Eskom for lower tariffs.
Nellis Bester, chair of the Ferroalloy Producers Association (Fapa) warned of impending job cuts if a competitive energy deal was not reached urgently.
“At this stage, nothing is in writing, and we hope that something will materialise before the end of February. All smelters will be contemplating retrenchments from March to April in the absence of this. Regulation changes gives us options for competitive prices, but these options require government support,” Bester said.
In 2025 Eskom applied for a temporary waiver of take-or-pay obligation for the Samancor Chrome and the Glencore-Merafe Venture, which was approved by the National Energy Regulator of South Africa (Nersa) as a temporary reprieve for the smelters.
Nersa is currently processing an application for an interim tariff adjustment for the smelters.