By: Davies Tsikayi

South Africa holds an estimated 70 to 80% of the world's known chrome reserves. Yet China, with less than 1% of global chrome deposits, now dominates global ferrochrome production. The mechanism behind this paradox is straightforward: two decades of relentless electricity price increases have rendered South African smelters uncompetitive, forcing producers to shut furnaces and export raw chrome ore to China, where it is processed using cheaper power into higher-value ferrochrome for stainless steel.

This represents a massive value transfer. South Africa extracts the raw material and bears the environmental cost but loses the beneficiation revenue and industrial jobs to a country with virtually no chrome resources of its own.

The numbers are stark. According to Eskom's own published data, average electricity prices rose from 16.05 c/kWh in 2003 to 178.63 c/kWh by 2024/25, a more than 1,000% increase in just over two decades. The standard industrial tariff now stands at 195.95 c/kWh, more than three times the 62 c/kWh that smelters say they need just to break even. During the shock period of 2008 to 2013, five consecutive years of approved increases ranging from 16% to 31.3%, while Eskom had originally applied for up to 60%, fundamentally reshaped the cost base of every energy-intensive industry in the country.

Between 2003 and 2024/25, Eskom’s total revenue increased from R31.6 billion to R338.9 billion. Over the same period, total electricity sales declined from a peak of 256,959 GWh to 189,723 GWh, with industrial consumption falling by nearly 40% from its highest point. This meant Eskom was generating more revenue from a gradually shrinking customer base, creating a challenging dynamic for the utility and the industries it serves.

In the ferrochrome sector specifically, only 11 out of 66 smelters remain operational. While South Africa retains installed capacity of 4.8 million tonnes per annum, actual production was projected to collapse to just 1 Mtpa in 2026 without intervention.

That intervention arrived in late February 2026. Electricity Minister Ramokgopa announced that government and Eskom would offer the Glencore-Merafe joint venture and Samancor Chrome an electricity tariff of 62 c/kWh, effectively halving the tariff these groups were paying a year ago. The Minister called it the biggest single announcement of his tenure, projecting it would protect thousands of jobs, boost exports by R76 billion, add R18 billion in Eskom revenue through restored demand, and generate R5.5 billion in additional tax. Up to 49 furnaces could be brought back online by December 2027.

The relief is welcome, but it raises hard questions that demand honest answers.

First, cross-subsidisation. The government has committed to funding the tariff shortfall through Eskom's existing R230-billion debt relief package so that residential and commercial customers do not bear additional cost. The initial interim plan alone was projected to cost R5.2 billion. Ironically, other electricity users were already cross-subsidising smelters under the NPA regime. This intervention simply shifts the burden from the tariff base to the national fiscus.

Second, broader eligibility. If 62 c/kWh is viable for ferrochrome, the pressure to extend similar relief to steel, aluminium, and other energy-intensive sectors will be immediate. The Minister has already signalled as much, stating: "We are starting here, but we are coming to everyone." ArcelorMittal SA's Newcastle plant is already under care and maintenance after Eskom rejected its NPA application despite NERSA ruling it eligible. The precedent set by the 62c tariff creates an unavoidable policy question: if government can subsidise ferrochrome to prevent deindustrialisation, how does it justify withholding the same from steel and aluminium?

Third, sustainability. The NERSA-approved 87 c/kWh intervention is explicitly a 12-month emergency measure running to December 2026. The 62 c/kWh framework is positioned as a longer-term solution, but its duration and contractual terms remain under negotiation. Without permanent restructuring of Eskom's pricing framework, one that addresses the structural cost escalation that created this crisis, the same dynamics will reassert themselves once any time-bound relief expires. As the Ferro Alloys Producers' Association warned, interim measures may only delay retrenchments by months, not prevent them.

The 62 c/kWh tariff is not generosity. It is a necessary correction to a pricing structure that has systematically affected South Africa's industrial base. The real question is whether government has the fiscal space and political will to extend this logic across the broader economy, and whether Eskom can evolve into an enabler of industrial revival.

The choice now is strategic. Electricity pricing can continue to prioritise short term financial recovery even as industrial demand contracts. Or it can be recalibrated to balance system sustainability with economic competitiveness. The 62 c/kWh decision indicates awareness of what is at stake. Whether it marks the start of durable reform will determine whether South Africa remains primarily an exporter of raw materials or restores the industrial base that once underpinned its growth.