South Africa approves discounted Eskom power tariff to save chrome industry from China competition

South Africa is making an unusual bet to save one of its most important mining industries: cheaper electricity.

• South Africa has approved discounted electricity tariffs for two major ferrochrome producers as it seeks to revive a struggling industry.
• The country lost its position as the world’s leading ferrochrome producer to China after years of rising power costs.
• Eskom says the move will help preserve jobs, industrial capacity and export earnings without burdening taxpayers.
• The decision highlights the growing competition between Africa and China for control of mineral processing industries.

In a move aimed at preventing further decline in the country’s ferrochrome sector, energy regulator NERSA has approved a discounted power tariff for Samancor Chrome and the Glencore-Merafe ferrochrome joint venture, giving the companies access to electricity at 62 South African cents ($0.038) per kilowatt-hour.

The decision reflects growing concern over the future of an industry that was once a global powerhouse but has steadily lost ground to China after years of soaring electricity costs.

For South Africa, the stakes go far beyond chrome.

The country holds the world’s largest chrome ore reserves and remains the biggest producer of the raw mineral.

Yet it has increasingly watched the higher-value business of turning chrome into ferrochrome migrate overseas, particularly to China, where processors benefit from lower operating costs and stronger industrial support.

Ferrochrome is a crucial ingredient in stainless steel production, making it an important part of global manufacturing supply chains.

South Africa’s ferrochrome industry has been under pressure for more than a decade as electricity prices surged.

According to Eskom, power costs for smelters have increased roughly tenfold since 2008, forcing numerous operations to shut down or scale back production.

The closures have had ripple effects across mining communities, suppliers and exporters, raising concerns about job losses and the long-term erosion of the country’s industrial base.

A battle for beneficiation

The latest intervention comes at a time when African governments are increasingly trying to process more of their mineral resources domestically instead of exporting raw materials.

The issue has become even more important amid a global race for critical minerals and industrial supply chains, with countries seeking greater control over value-added manufacturing.

South Africa’s chrome industry sits at the centre of that debate.

While the country continues to mine vast quantities of chrome ore, much of the value generated from processing that ore increasingly accrues elsewhere.

Industry groups have long argued that high electricity costs are one of the biggest obstacles preventing local producers from competing internationally.

By approving the discounted tariff, regulators are effectively attempting to preserve local processing capacity and prevent further migration of production overseas.

Jobs and exports at risk

Eskom said the agreements will run for different periods, five years for Samancor Chrome and three years for the Glencore-Merafe venture, but will operate under similar pricing and risk-sharing arrangements.

The utility argues that keeping ferrochrome smelters operational is not only important for industrial output but also for employment, export revenues and electricity demand.

“The framework is structured within a regulated environment, includes appropriate risk-sharing mechanisms and does not place additional financial obligations on standard tariff customers or taxpayers,” Eskom Chief Executive Dan Marokane said.

Eskom further stated that the revenue impact of the discounted tariff will be ring-fenced and cannot be recovered from households or businesses through future tariff adjustments.

Eskom’s turnaround creates room for intervention

The approval also highlights how dramatically Eskom’s position has changed in recent years.

Just a few years ago, South Africa’s electricity crisis was dominated by rolling blackouts that crippled mining and manufacturing activity.

However, improvements in plant performance and generation availability have significantly reduced power disruptions, giving the utility more flexibility to support strategic industries.

Marokane acknowledged that Eskom’s operational recovery played a role in making the arrangement possible.

“Without the success of Eskom’s turnaround over the past three years, driven by the commitment of our 40,000 employees, we would not have been in a position to support the ferrochrome industry or help prevent significant job losses,” he said.

For South Africa, the discounted tariff is ultimately about more than electricity.

It is a test of whether the country can retain more value from its mineral wealth, protect industrial jobs and remain relevant in a global ferrochrome market increasingly dominated by China.

The outcome could shape not only the future of South Africa’s chrome industry but also wider debates across Africa about how resource-rich economies can compete in the race to process, rather than simply export, their natural resources.