The cliché of reindustrialising the South African economy might be becoming a bit long in the tooth for some, but if you stop trying and stop believing it’s possible, then those will be the laurels on which you will rest.

Localised manufacturing will always be a core contributor to a healthy GDP and manufacturing investment requires investor and business confidence to create meaningful economic transformation.

The announcement that South Africa’s ferrochrome industry has received a reprieve following the conclusion of new negotiated pricing agreements (NPAs) between Eskom, Glencore Merafe Chrome Venture and Samancor Chrome is to be lauded.

The agreements, built around a reduced electricity tariff of 62c/kWh, provide a three-year pricing framework for the Glencore Merafe Chrome Venture and a five-year agreement for Samancor Chrome. Together, they represent one of the most significant interventions aimed at restoring the competitiveness of a sector that has been under pressure from rising electricity costs for more than a decade.

For ferrochrome producers, electricity is the single largest operating cost. Since 2008, Eskom tariff increases have steadily eroded South Africa’s position as a producer of value-added ferrochrome. While the country holds an estimated 80% of the world’s known chrome reserves, much of that ore has increasingly been exported in raw form to countries such as China, where it is converted into ferrochrome using lower-cost electricity. The result has been the closure or suspension of many domestic smelters and the loss of beneficiation capacity.

The new pricing framework is intended to reverse that trend. The conclusion of the NPAs enables Glencore Merafe Chrome Venture to restart its Boshoek and Wonderkop smelters – though this won’t be overnight – while providing the business with greater certainty over future operating costs. The company has described the agreement as a critical step towards rebuilding its smelting operations and supporting the long-term sustainability of the sector.

For Samancor Chrome, the longer five-year agreement offers similar certainty, allowing longer-term production planning and investment decisions. Eskom has indicated that although the agreement periods differ, the pricing mechanisms and commercial conditions remain consistent across both companies.

The implications extend beyond the ferrochrome industry. Because ferrochrome is the principal alloying element used in the production of stainless steel, a stronger domestic ferrochrome industry secures local supply chains while supporting downstream manufacturers involved in stainless steel fabrication, mining equipment, construction products, automotive components and industrial plant machinery and wear parts. Stable ferrochrome production also reduces reliance on imported material and strengthens South Africa’s manufacturing base.

The agreements also support government’s long-standing objective of mineral beneficiation. Exporting chrome ore creates mining jobs, but converting that ore into ferrochrome generates additional employment in smelting, engineering, maintenance, transport and logistics. Every tonne processed locally retains more value within the South African economy than exporting raw ore alone.

There are also benefits for Eskom. The utility retains large industrial customers with predictable electricity demand, improving utilisation of generating capacity and providing stable long-term revenue without placing the full burden on other electricity consumers. Eskom has argued that the agreements balance industrial sustainability with the utility’s own financial position while supporting broader reindustrialisation objectives.

The new tariff structure is not a complete solution. South African producers continue to compete against countries with lower energy costs, while global ferrochrome prices remain cyclical. Investment in plant efficiency, technology and reliable electricity supply will remain necessary if the industry is to regain market share.

Nevertheless, the negotiated pricing agreements mark an important shift. Rather than allowing South Africa’s chrome reserves to support beneficiation elsewhere, the framework creates an opportunity to rebuild domestic smelting capacity, preserve skilled industrial employment and strengthen the country’s position in global stainless steel supply chains. For an industry that has spent years losing ground, these agreements provide a manifesto from which growth can begin once again.

Hopefully the South African Government will consider extending such agreements to other electricity-intensive industries.

Damon Crawford
Online Editor / Journalist