South Africa is weighing a range of policy measures as various manufacturing sectors – from ferroalloys and steel, to automotives – face existential threats.

The causes of their eroded competitiveness are familiar to all South Africans: soaring electricity prices, surging imports, logistics bottlenecks and, more recently, a strengthening rand.

Recent hearings at the National Energy Regulator of South Africa laid bare just how severe the pressure has become for ferroalloys. Of the country’s 67 furnaces, only eight were operational at the end of December, with only four of the country’s 48 ferrochrome smelters still running.

Their continued operation is in keeping with South Africa’s official policy of beneficiation. Yet that policy has run headlong into the reality of electricity prices that have risen by some 900% since 2007; a catastrophic scenario for businesses where electricity makes up between 40% and 60% of total production costs.

Ferrochrome producers indicate that unless prices are capped at 62c/kWh (a massive discount even against the already discounted 135c/kWh available under their negotiated pricing agreements) the last few smelters will close.

There is now a scramble to secure that pricing, with an interim tariff of 87c/kWh approved, while talks continue on a cheap-coal-for-cheap-electricity deal. It’s a big decision, with little clarity about its sustainability, whether it can be extended to other smelters, and how standard tariff customers will be protected.

In the steel sector, meanwhile, policymakers are considering the acquisition of ArcelorMittal South Africa by the State-owned Industrial Development Corporation, ostensibly to salvage a longs business that has not made money for years and which is already mostly in care-and-maintenance. This, while government also mulls the imposition of tariffs on various grades of steel following a fa-reaching review of the steel tariff book, but holds the line on a mini-mill-supportive scrap policy

Then, there are the even bigger decisions facing the automotive industry, which represents South Africa’s industrial policy flagship. The context is a vulnerability precipitated by a dramatic rise in vehicle imports from China and India; domestic production stagnation; and an export outlook clouded by a lack of policy clarity regarding support for the domestic production of electric vehicles as the markets that consume the passenger vehicles South Africa makes transition from internal combustion engines to electric cars.

Here again, government is looking primarily at tariff policy, with the focus being mainly on closing the gap between applied tariffs and the bound rate allowed for under the World Trade Organisation. There are warnings, however, that tariffs represent a blunt instrument, and that there could be unintended negative consequences for the very original-equipment manufactures and component makers they are designed to protect.

In all instances, it is becoming clear that, while interventions will be needed, none of the policy options are risk or cost free. For this reason, it is vital that these decisions are made in full view of the public so that the benefits and costs are visible and can be widely debated.