By: Hassan Khan - CEO of Coega Steels

Coega Steels, a cornerstone of the Nelson Mandela Bay area’s industrial economy, wishes to correct any misperceptions relating to its temporary lease of an industrial-scale transformer from the Nelson Mandela Bay Municipality (NMBM).

When Coega Steel’s main power transformer prematurely failed in mid-August, the company urgently explored all available replacement options to avoid a halt to production and the job losses that would arise as a result.

It quickly became apparent that no suitable transformer of the required specification was commercially available in South Africa. As a major electricity customer of the Nelson Mandela Bay Municipality, Coega Steels therefore approached the Municipality once it was clear that a replacement could not be sourced through the private sector.

Given the severity of the situation — with production suspended and hundreds of jobs at risk — Coega Steels submitted a formal request to the Municipality, setting out the potential economic and employment consequences of prolonged downtime. Following this engagement, a lease agreement was signed for a municipal spare transformer which, we understand, had been in storage and unused since 2018.

It is important to emphasise that Coega Steels is not, and has never been, privy to the Municipality’s internal legal, governance or administrative processes. The company’s engagement with the NMBM was conducted strictly in accordance with the guidance, procedures and assurances provided by municipal officials.

In parallel, Coega Steels actively explored alternative solutions. Eskom indicated a willingness to assist; however, the available Eskom transformers were of a different vector group and were technically incompatible with Coega Steels’ existing electrical infrastructure. Modifying the plant to accommodate such a transformer would have required substantial time, cost and operational risk, with serious implications for the commercial viability of the business.

Coega Steels therefore requested the temporary lease of a suitable transformer held by the Municipality. Had this request been declined, the company would have proceeded with extensive system modifications to accept an Eskom unit, notwithstanding the significant disruption this would have caused.

The lease arrangement delivered clear mutual benefits. It enabled the swift resumption of production and the return of employees to full-time work, while also generating direct financial value for the Municipality. The NMBM will earn approximately R3 million in rental income from the lease of the transformer and continues to benefit from the sale of electricity to Coega Steels, which generates an estimated annual markup of around R30 million for the municipality

The lease is expressly short-term and will remain in place only until Coega Steels’ newly ordered replacement transformer is delivered, installed and commissioned. That replacement transformer has already been secured and is expected to be operational within the next five to six months. Upon commissioning, the leased municipal transformer will be returned to the NMBM.

Coega Steels remains committed to operating responsibly, transparently and in good faith, and believes this arrangement has supported both industrial continuity and municipal revenue during an exceptional and urgent operational failure.