KEY POINTS
- Nersa is unconvinced by Eskom’s smelter tariff relief plan due to unclear funding sources and potential risks to Eskom’s finances.
- Industry groups back the proposal as a way to save jobs but warn that other smelting sectors face similar crises and need equal support.
- Labour supports discounted tariffs only if they are tied to a halt in retrenchments, while smelters argue the proposed price is still too high to ensure survival.
Members of South Africa’s energy regulator, the National Energy Regulator of South Africa, Nersa, have expressed uncertainty over Eskom’s request for an interim electricity tariff for Samancor and Glencore-Merafe’s ferrochrome smelters, describing the proposal as lacking clarity on funding and long-term viability.
The interim tariff is intended to act as a temporary bridge to an even lower electricity price expected to take effect from 1 March, as part of efforts to prevent further collapse in the country’s smelting industry.
During a public hearing on Tuesday, Eskom also asked Nersa to simultaneously consider a separate application to extend a waiver on the “take-or-pay” clause in its negotiated pricing agreements with the two companies.
The waiver, first approved in August for six months, would be extended by another year due to the financial hardship faced by the smelters.
Smelter rescue plan tied to job preservation
Eskom’s applications form part of a broader government-backed strategy aimed at stabilising South Africa’s struggling smelter sector and protecting large numbers of jobs across mining, processing, and related value chains.
Several smelter operators have already issued retrenchment notices, heightening concerns about mass job losses. Industry group Ferro Alloy Producers Association (Fapa) backed Eskom’s proposal, arguing that high electricity prices have rendered many beneficiation industries uncompetitive.
Fapa chair Nellis Bester said manganese, silicon, and vanadium smelters face similar pressures and urged Nersa to extend interim tariff relief beyond the two ferrochrome producers to other energy-intensive smelting operations that remain active.
A central concern raised by Nersa members is how the revenue gap created by discounted tariffs will be funded. Eskom has insisted that households and other electricity users will not be required to subsidise the smelters.
However, Electricity and Energy Minister Kgosientsho Ramokgopa has estimated the interim solution will cost about R5.2 billion, while some industry sources place the figure closer to R9.6 billion over a year.
