Jobs across South Africa’s steel value chain have received a temporary lifeline after the National Energy Regulator of South Africa (Nersa) approved a significant reduction in electricity tariffs for ferrochrome smelters, easing immediate shutdown and retrenchment risks in an industry under severe cost pressure.
The regulator said in a statement on Friday it had authorised a 12-month electricity price concession for ferrochrome operations run by Samancor Chrome and the Glencore-Merafe Chrome Venture, following an application by Eskom, in a move aimed at stabilising production while broader solutions are explored.
Relief is for 12 months only
“Acting in terms of the Electricity Regulation Act and after following a public consultation process, Nersa approved a temporary electricity price relief of 87.74 c/kWh for the ferrochrome smelters for a 12-month period,” the regulator said.
The decision reduces the Negotiated Pricing Agreement tariff from 135.82 cents per kilowatt-hour to 87.74 cents per kilowatt-hour. This is a 35% cut for the period from January 1 to December 31, 2026.
Nersa said the adjusted tariff covers the marginal cost of electricity. This will be together with necessary subsidies and legacy charges. And it also ensures that Eskom does not incur direct operational losses while providing temporary relief to the industry.
“This adjusted tariff covers the marginal cost of electricity, together with necessary subsidies and legacy charges. It is also ensuring that Eskom does not incur direct operational losses while providing temporary relief to the industry,” Nersa said.
The regulator stressed that the relief would not be funded by other electricity users.
“The proposed ring-fenced government support mechanism ensures that standard retail customers, including residential and commercial customers, are not burdened with additional cross-subsidies arising from the relief measures,” it said.
All regulatory processes followed
Nersa said the approval followed a full regulatory process. This is including the publication of Eskom’s application for public comment and a virtual public hearing. Thirteen written submissions and six oral presentations were received, all supporting the application.
The regulator also warned of the broader economic consequences of inaction.
“The significant negative economic consequences that would arise from the closure of the smelters, including impacts on local economies and upstream and downstream industries, were also considered,” Nersa said.
To ensure oversight, Nersa said Eskom would be required to submit regular updates.
“Eskom must submit progress reports on the relief’s implementation three months after it takes effect. And every three months thereafter until the relief period concludes,” the regulator said.
Organised labour welcomed the decision. But it cautioned that the intervention may not be sufficient to prevent further closures. The Congress of South African Trade Unions (Cosatu) released a separate statement on the matter. It said the tariff reduction provided important, though limited, relief to electricity-intensive smelters.
“This is a positive step towards finding a solution for these intensive electricity users whose sustainability, as well as the jobs of thousands, have been threatened by the increasingly unaffordable price of electricity,” Cosatu said.
However, the federation warned that some smelters could still close in the coming months.
Labour unions decry short term relief
“Whilst appreciating this progressive ruling, we fear that it does not go far enough to prevent some smelters from still closing in March. Unless urgent engagements continue,” Cosatu said.
It said it was essential that retrenchment processes be suspended during the relief period. This to allow negotiations to continue, and warned that South Africa could not afford additional job losses. Especially given an unemployment rate of 42.4%.
The federation added that affordable electricity tariffs were central to stabilising strategic industries. To also protect jobs and support broader economic recovery. While also calling for urgent measures to address Eskom’s financial challenges and rising municipal debt.
