Cabinet has approved export controls and an electricity incentive for South Africa’s ferrochrome industry after receiving an update on the socioeconomic impact of the continued decline of the industry.

At its meeting on Wednesday, Cabinet gave the Department of Electricity and Energy the go-ahead to finalise a government-industry agreement for an electricity tariff realignment in support of the ferrochrome sector.

No details of the incentive were provided, but several electricity-dependent companies in South Africa have successfully applied for negotiated pricing agreements (NPAs) with Eskom, whereby they receive discounted tariffs in return for Eskom being allowed to interrupt their supply for certain periods when the supply/demand balance is under strain.

While the NPA with South32’s Hillside aluminium smelter, in KwaZulu-Natal, is the most well-known tariff incentive, the policy decision to allow electricity-intensive companies operating in South Africa to enter into NPAs featured in Eskom’s most recent tariff submission to the regulator. This, given that the standard tariff customer pays for the revenue foregone as a result of the NPAs.

The utility included an application for 10 additional NPAs in its larger submission to the National Energy Regulator of South Africa, which subsequently approved NPA sales of 22 581 GWh for the 2025/26 financial year, 22 625 GWh for the 2026/27 year, and 22 713 GWh for the 2027/28 financial year in its final decision.

Eskom did not disclose a revenue value associated with accommodating these additional subsidies, but it has been estimated at about R20-billion yearly. The utility was granted a 12.74% increase for implementation on April 1, as well as 5.36% and 6.19% for the two outer financial years.

A research paper released by Meridian Economics on the Hillside NPA, coincidentally as the Cabinet statement was released, states that this 10-year NPA represents a discount of about 50% to Hillside relative to what it would pay under the standard tariff.

As of the 2025/26 financial year, Meridian calculates the yearly value of the discount at about R10-billion.

“For the Hillside NPA to provide value to the country, the economic benefits created by electricity sales to Hillside would need to exceed those that could be realised by supplying the same amount of power to multiple other power consumers (existing and new) across the economy – by at least about R7-billion a year,” the research note adds.

EXPORT CONTROLS

It was also confirmed in the Cabinet statement that chrome ore exporters would be required to obtain a permit from the International Trade Administration Commission of South Africa, or Itac, and that a chrome ore export tax would be developed.

Besides the proposed electricity incentive, the special economic zone smelters incentives framework and regulations would also be expanded, the Cabinet statement added.

In March, Mineral and Petroleum Resources Minister Gwede Mantashe confirmed that discussions were under way with chrome producers on ways to halt the decline in domestic ferrochrome production following the closure of more than half of the country’s 59 chrome furnaces over the past number of years.

Mantashe reported that a Ministerial Task Team, comprised of the departments of Trade, Industry and Competition, Electricity and Energy, Transport and the National Treasury, had been convened to urgently develop a revival plan for the smelting sector and to ensure its long-term sustainability.

He said the task team was focused on several areas, including reviewing electricity pricing models; introducing export restrictions on non-beneficiated minerals; improving rail and port infrastructure; incentivising local beneficiation; and modernising legislative tools to give government the power to intervene where necessary.

The proposed introduction of export restrictions on chrome ore comes as Itac is reviewing export controls on scrap metal, including the controversial Price Preference System and the export tax.

ArcelorMittal South Africa has cited these policies as one of the reasons for a decision to wind down its long-products business and place its Newcastle mill into care and maintenance, arguing that they gave scrap-based producers of steel an unfair advantage.

That wind-down was halted again for six months in April, however, after the Industrial Development Corporation stepped in with a R1.68-billion interest-free loan to support ongoing production at Newcastle while various options for salvaging the mill were investigated.