Nersa Aims to Make Ferrochrome Tariff Call by End May as It Launches Public Consultations

Why It Matters

A reduced tariff could keep key ferrochrome facilities operating, safeguarding South Africa’s dominant chrome ore reserves and providing Eskom with valuable load‑retention revenue amid declining demand.

Key Takeaways

• Eskom offers 62 c/kWh tariff to 10 ferrochrome smelters
• Public hearings start 25 May; written comments due 22 May
• Tariff could cut smelter electricity costs by ~30%
• Deal aims to preserve 12.8 TWh of Eskom load
• R230 billion debt relief equals roughly $13 billion for Eskom

Pulse Analysis

South Africa sits on roughly 80% of the world’s chrome ore reserves, yet its ferrochrome industry has been hemorrhaging capacity as electricity costs ballooned to 136 c/kWh in early 2024. With power accounting for about 40% of smelting expenses, producers like Samancor and Glencore‑Merafe warned they would shutter plants and lay off workers unless tariffs became competitive with China’s lower rates. Nersa’s public consultation, slated for late May, is a critical juncture for aligning energy pricing with the country’s strategic mineral advantage while averting further erosion of export‑ready chrome.

Eskom, burdened by a roughly $13 billion debt‑relief package from the Treasury, is seeking a load‑retention solution that simultaneously shaves costs for heavy‑industry customers and plugs a 12.8 TWh revenue gap. The proposed 62 c/kWh tariff, embedded in a seven‑point risk‑adjusted contract—including hardship clauses, inflation‑linked escalations, and a take‑or‑pay provision—offers a differentiated approach that could become a template for other electricity‑intensive sectors. By ring‑fencing the deal, Eskom argues it will not shift costs onto residential or small‑business consumers, a claim that will be scrutinized as the regulator weighs socioeconomic impacts.

If approved, the tariff could revive South Africa’s ferrochrome output, bolstering export earnings and preserving jobs in a sector that underpins the nation’s mining export basket. It also signals a willingness to tailor NPAs beyond traditional power‑purchase agreements, potentially opening the door for similar arrangements with aluminium, steel and other heavy industries. However, critics warn that subsidising large industrial users may exacerbate affordability challenges for vulnerable households, especially as the country grapples with high inflation and energy poverty. The outcome will therefore shape not only Eskom’s financial trajectory but also the broader debate on industrial policy and equitable energy access in South Africa.