POWERING UP: Eskom’s three tenors sing a song of reindustrialisation under new pricing model

The minister of electricity and energy, Kgosientsho Ramokgopa, has a proven track record of opening his briefings with a history lesson. On Tuesday, 18 August, he spoke of the 66 smelters that used to drive South Africa’s economy. Only 11 remain operational – 17% utilisation.

Under the new pricing model that he introduced alongside the Eskom dynamic duo of Mteto Nyati and Dan Marokane, that number will rise to 49 by the end of 2027 – 74% utilisation.

In Ramokgopa’s very specific estimate, that level of industrial operation will create and preserve 11,448 direct jobs and 121,392 indirect jobs.

While the government and Eskom are celebrating the policy framework, Transalloys, the last operating manganese smelter in South Africa, offered Daily Maverick an urgent, on-the-ground perspective.  

Transalloys had to halt production on 1 July, putting a multibillion-rand investment and 600 jobs at severe risk because it was left out of the discussions that got the ferrochrome smelters their bailout.

CEO Konstantin Sadovnik welcomed the policy focus on the “unsustainable cost of electricity”, but issued a warning regarding timelines:

“Policy direction alone, however, does not address the immediate crisis. We hope that policy discussion would not derail or defer the much-needed and long-overdue practical solution for a sustainable tariff for Transalloys.”

Progress, but at what cost?

The intervention leverages the existing fiscal framework negotiated with the National Treasury. Eskom CEO Marokane explained that due to the power utility’s improved financial trajectory, the government had tempered its financial support in this year’s Budget speech.

As a result, “The R10-billion that is outstanding from the last tranche of the debt relief programme will be utilised and directed towards this intervention.”

Rather than costing the Treasury, Ramokgopa projects that the preservation and expansion of these tax-paying industries will leave the fiscus “better off by about R5.5-billion” in tax revenue.

The minister is adamant that the trio is not asking for new money.

Instead, the pricing reform is positioned as the first lever in a broader macroeconomic strategy to reverse South Africa’s deindustrialisation, which saw manufacturing’s contribution to GDP drop from around 22% in the late 1990s to about 12% today.

Ramokgopa sketched out this reindustrialisation vision by stating that Eskom is transitioning from being a constraint to playing a “catalytic role in the South African economy”.

Relying on the government’s critical mineral strategy, he articulated a shift in national economic policy:

“We are now moving away from colonial patterns of extraction, so there must be beneficiation source.”

Nyati, the Eskom board chair, echoed this, celebrating the announcement as a “proud milestone in South Africa’s journey towards sustained industrial growth and shared prosperity”.

Changing the game

By ensuring smelters have affordable electricity, the government expects an injection of R20-billion in raw mineral expenditure and R76-billion in export earnings.

Ramokgopa contextualised the core financial benefit of the tariff by emphasising that the government is “not subsidising these industries … we’re making them more competitive” against global competitors like China.

And because smelters are intense 24/7 consumers of electricity, keeping them open anchors Eskom’s revenue streams, allowing the utility to earn “an additional revenue of R17.9-billion”.

Nyati’s framing focused on it as an extension of Eskom’s dual commercial and developmental mandate.

He called this tariff “a lifeline to an industry that is vital for beneficiation, global competitiveness and thousands of jobs”.

The chairperson also strongly rejected the notion that this poses a risk to Eskom, saying, “This is not charity, it is strategic stewardship that powers South Africa’s growth sustainably for everyone.”

The only question left now is whether Eskom could have acted earlier to save more jobs and reduce the costs of having to restart the extinguished smelters, but at least the fire of industrial hope is about to burn again. DM