Pressure mounts on Eskom pricing as more retrenchments loom

The pressure is mounting on Eskom to ensure the proposed discount deal with smelters work, after Transalloys, a manganese smelter situated in eMalahleni in Mpumalanga, announced on 29 December that it had issued a Section 189 notice, potentially putting 600 direct jobs at risk.

A further estimated 7 000 livelihoods linked to the smelter and the broader eMalahleni economy via its supply chain and various dependencies could also be impacted, should the company not secure the required relief regarding its energy costs.

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This comes as the clock is ticking on a proposed deal that would allow Eskom to buy excess coal from local producers at lower prices to feed its older, under-utilised coal-fired power stations to generate cheaper electricity.

This electricity would then be ring-fenced for ferrochrome smelters, to save up to 300 000 jobs in the wider smelting industry and kickstart re-industrialisation in the country.

Eskom announced a Memorandum of Understanding (MoU) with Samancor Chrome and the Glencore-Merafe Chrome Venture on 8 December to implement a long-term intervention before the end of February.

This allowed Glencore to delay its own Section 189 process, which would otherwise have resulted in the loss of 2 500 jobs.

Electricity costs remain high

In terms of the MoU, the two companies will pay 87.7c/kWh until the end of February, when they expect the price to drop to 62c/kWh. Currently, the companies are paying closer to 135c/kWh under the negotiated pricing agreements (NPAs) with Eskom.

This is already a big discount, provided within a policy framework designed to assist energy-intensive users under certain strict conditions.

Electricity and Energy Minister Kgosientsho Ramokgopa disclosed earlier in December that government will subsidise the energy costs for the period until the end of February to the tune of R5.2 billion. It is not clear where the funds will come from.

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Transalloys is also currently operating under an NPA, approved by the energy regulator Nersa earlier this year, but, as is the case with other smelters, the electricity cost is still killing it.

Transalloys CEO Konstantin Sadovnik said the company cannot sustain operations under the current conditions.

“Energy is our biggest cost driver.

“At the current Nersa-approved tariff levels, we are competing against international smelters whose electricity costs are roughly half of ours. That gap makes sustained operation impossible.”

He said that throughout 2025, Transalloys operated intermittently, as negative operational margins and sustained cash-flow pressures made continuous production impossible. The plant is currently running only two of its five furnaces.

“This is a reflection on how things have deteriorated,” he said.

Manganese beneficiation challenges

Sadovnik added that manganese beneficiation faces harsher conditions than the ferrochrome sector, which has dominated public discussion in recent months.

Manganese smelting, he explained, is significantly more energy-intensive, and Transalloys’ position is further weakened by the fact that it is not an integrated producer and cannot cross-subsidise beneficiation from primary ore production.

According to Sadovnik, current market conditions – including exchange-rate pressures against the US dollar and euro – manganese beneficiation in South Africa has become fundamentally unsustainable.

Manganese ferroalloys are bulk commodities sold into highly price-sensitive global markets, where electricity costs are the single most decisive competitiveness factor.

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While Transalloys has previously welcomed government’s efforts to develop a sustainable energy pricing framework for energy-intensive smelters, Sadovnik said the lack of certainty has now become an opportunity cost that threatens the business in its entirety.

Based on the information available, he said the proposed blueprint solution for ferrochrome smelters, at preferable pricing levels, would also be the appropriate solution for Transalloys.

“This could preserve what remains of manganese beneficiation in South Africa, with the potential to stabilise and even grow employment,” he said.

“We regret placing this level of uncertainty on our employees and their families at this time, but the ongoing lack of clarity around our operating environment leaves us with no responsible alternative.

“This is an extraordinarily difficult announcement to make as we approach the New Year,” Sadovnik added.

Uncertainty threatens industry

He warned that uncertainty around implementation, timing, and the current exclusion of manganese smelters from the wider discourse about electricity tariffs for smelters is eroding the company’s ability to protect jobs.

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“Transalloys is hopeful that the issue will be resolved in the next two months and that implementation will be swift. Without that certainty, the company will have no option but to proceed with restructuring around February,” Sadovnik said.

He said that the company remains ready to work urgently with government, Eskom, Nersa and trade unions to find a sustainable solution.

“Time is the critical factor now,” he said.

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