KEY POINTS
- Eskom has signed an MoU with Samancor Chrome and the Glencore–Merafe Venture to craft a long-term solution for the ferrochrome industry after months of financial strain.
- A task team will deliver a proposed intervention within three months, alongside ongoing regulatory work on interim tariff adjustments.
- Smelters have agreed to revive 40 per cent of furnace capacity and suspend retrenchments once interim tariff relief is approved.
Eskom has reached a long-awaited understanding with two of South Africa’s biggest ferrochrome producers, Samancor Chrome and the Glencore–Merafe Chrome Venture, after a series of tense engagements with government and organised labour over the future of the troubled sector.
The agreement, concluded at the end of last week, is designed to chart a realistic path out of a financial squeeze that has left the country’s smelters struggling to stay online.
The memorandum of understanding formalises what officials describe as a joint commitment to build a sustainable intervention that shields a vital export industry without placing fresh burdens on an already strained power system. It is expected to feed into a broader package of tariff and regulatory adjustments being negotiated between industry and government.
A multi-stakeholder task team has now been set up, drawing together Eskom, the two ferrochrome producers and senior government representatives. Its mandate is to produce a viable, long-term pricing and competitiveness model within three months.
Officials say the group will aim to support industrial output while ensuring that any electricity-pricing arrangement does not spill over into higher costs for households and small businesses, which are still absorbing the consequences of years of power system instability.
Smelters trigger hardship clauses as market pressures and power costs intensify
Both Samancor and Glencore–Merafe have been operating under negotiated pricing agreements granted by the National Energy Regulator of South Africa in late 2023.
These six-year contracts were conceived as part of an interim framework rolled out in 2020 to stabilise energy-intensive industries facing global competition and to keep industrial jobs from evaporating.
But by early this year, the smelters activated the hardship provisions written into their agreements, citing a combination of weak global demand, sliding prices and escalating electricity costs that had become increasingly difficult to absorb.
Eskom responded by seeking temporary relief from its take-or-pay obligations, an application that Nersa approved for a limited period. The waiver offered short-term breathing space but also underscored the need for a more durable solution.
Regulators are now working through a request for an interim tariff adjustment, while government drafts a complementary mechanism intended to deliver a more competitive electricity price path for the sector. Both processes are expected to converge within the next quarter.
Should the interim tariff be approved, the two smelters have agreed to halt the Section 189 retrenchment process and return roughly 40 per cent of their furnace capacity to operation while the task team completes its long-term plan. For communities dependent on the ferrochrome value chain, this marks a temporary reprieve in a year marked by rising uncertainty.
Eskom’s group chief executive, Dan Marokane, said the company welcomed what he described as a coordinated effort across government, labour and industry. He emphasised that while Eskom remained committed to supporting industrial production, it had to do so within a lawful and economically sustainable framework that protected the rest of its customer base from unintended cost shifts.
The utility reiterated that safeguarding households and small businesses remained central to its approach. It said the new collaborative structure offered a more predictable route to resolving longstanding tensions around electricity costs, industrial competitiveness and the country’s broader industrial resilience.
The MoU, officials say, reflects a shared determination to stabilise the ferrochrome sector, secure jobs and prevent further erosion of South Africa’s industrial capacity. Eskom added that it would continue to engage transparently with all stakeholders as the task team works on a solution that aligns with both the needs of industry and the health of the national grid.
