Africa-Press – South-Africa. Power utility Eskom says it has finalised a Memorandum of Understanding (MoU) with smelters in the country, which opens a path to preventing the loss of thousands of jobs in the ferrochrome sector.
Eskom said it signed the MoU with Samancor Chrome and the Glencore–Merafe Chrome Venture, following engagements with the Minister of Electricity and Energy and organised labour.
The MoU formalises a joint commitment to “develop a sustainable, long-term intervention for the ferrochrome sector”, which has been severely affected by global market pressures and rising production costs.
As part of the committement, a joint multi-stakeholder task team comprising Eskom, the two producers, and government representatives will be established, with the main focus being on electricity pricing.
Specifically, the team will develop an intervention that supports industrial competitiveness while ensuring that electricity-pricing solutions do not impose additional burdens on other customers.
The parties have agreed to present a proposed solution within three months.
The MoU had to be developed as the smelters started rolling out section 189 retrenchment notices to workers as their operations became to costly to run.
Glencore announced last week that it would idle its Boshoek and Wonderkop smelters from 1 January, while 2,400 workers were served papers.
That announcement followed another warning from Samancor Chrome, which recently said it may cut up to 2,496 jobs as it considers closing or shrinking operations.
Ferrochrome operations blossomed in South Africa in the early 2000s, with the country becoming one of the largest producers in the world.
However, South Africa lost its global lead to China in 2012 due to Eskom’s unreliable electricity supply and rapidly rising tariffs.
Eskom noted that Samancor and Glencore–Merafe currently operate under Negotiated Pricing Agreements (NPAs) approved by the National Energy Regulator of South Africa (NERSA) in October 2023.
“These six-year agreements, which took effect earlier this year, fall under the Interim Long-Term Framework issued by the then Department of Mineral Resources and Energy in 2020,” it said.
The framework provides qualifying energy-intensive industries with access to more globally competitive tariff structures aimed at supporting production, protecting jobs, and maintaining South Africa’s industrial capacity.
Earlier this year, both smelters activated the hardship provisions of their NPAs as market conditions deteriorated and electricity costs became increasingly difficult to absorb, Eskom said.
In response, Eskom applied for a temporary waiver of take-or-pay obligations, which NERSA approved for a limited period.
“While this helped stabilise operations temporarily, it highlighted the urgency of establishing a more sustainable, long-term solution,” it said.
NERSA is currently processing an application for an interim tariff adjustment for the smelters.
At the same time, the government is working on a complementary mechanism to support a more competitive pricing path for the sector, which is expected to be finalised over the next three months.
Once the interim tariff is approved, the smelters have committed to suspending the Section 189 retrenchment process and bringing approximately 40% of their furnace capacity back online while the long-term solution is developed under the MoU.
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