Electricity and Energy Minister Dr Kgosientsho Ramokgopa has reiterated that the cost of the solution being pursued to salvage South Africa’s ferrochrome smelters, most of which have been closed on the back of surging electricity tariffs, cannot be subsidised by other consumers.

Speaking to Radio 702 from the World Economic Forum in Davos, Switzerland, Ramokgopa confirmed that he was meeting with some global mining CEOs on a proposed solution, which had already been canvassed with domestic CEOs and labour leaders.

In December, Eskom signed a memorandum of understanding with Samancor Chrome and the Glencore–Merafe Chrome Venture in a bid to finalise an electricity tariff solution by March.

“What we have found is that our players in the ferrochrome space have been decimated, because they are uncompetitive because of the cost of electricity. The Chinese are offering electricity at about half what we are offering, so there is no way you will succeed when electricity constitutes about 45% of the fixed costs of that beneficiation.”

Without going into details, the Minister again confirmed that the “unique” solution being considered involved securing low-cost coal from “stranded assets” that could be used in power stations to enable Eskom to reduce the electricity tariff being charged to the smelters from about 135c/kWh to 62c/kWh.

“[Coal] is about 40% of the cost of electricity. So if you are able to bring that down, then we are in a sweet spot.”

At such a tariff, the domestic smelters could be competitive with those in China, where the bulk of South Africa’s chrome ore was currently being exported to produce ferrochrome.

The Minister said the closure of local smelters owing to high electricity costs had materially reduced economic value creation, and had also led to the loss of employment and tax revenue.

“The raw price of chrome ore is about $150/t, but when you have beneficiated it, the value is $1 150/t,” he said, arguing that the tax revenue that could be derived from the higher value product could be used to support the fiscus.

However, he stressed that the cost of the intervention could not be “socialised” across other consumers.

“It must be carried by this intervention, otherwise we will fix one area and create pressure for the South African economy, including households,” he said, while also indicating that the model could be replicated across other electricity-intensive industries if successful.

Ramokgopa was also speaking ahead of public hearings into Eskom’s request for temporary price relief for six Samancor Chrome and four Glencore-Merafe Chrome Venture smelters from take-or-pay stipulations included in negotiated pricing agreements approved in 2023.

The National Energy Regulator of South Africa has scheduled these hearings for January 27.