Ferroalloy sector fights Eskom bid

As hearings into Eskom’s proposed tariff increase kicked off on Monday, the ferroalloy industry has warned it will not survive a double-digit increase in electricity prices.

Eskom has applied for a 15% annual hike in the power price in each of the next three years. The national energy regulator of SA will only take a decision after three weeks of public hearings, which began in Cape Town on Monday.

“Should the 15% increase be effected then there will be little industry left to sell the electricity to and thousands of jobs linked to the ferroalloys industry will be at risk,” Ferro Alloys Producers Association (Fapa) chair Chabisi Motloung said.

The producers, represented by Fapa, are significant power users as they typically run smelting operations that account for 10% of Eskom’s power consumption and about a tenth of its revenue.

The past few years’ increases have already eroded industry margins enough to trigger section 189 retrenchment processes across the industry, Motloung warned.

“The margins have depleted to a point where numerous smelters have been closed or sold to competitors, with some producers starting new smelters outside of SA, and closing existing operations in SA, due to the steep electricity price,” he said.

“There is simply no more place for any further double-digit increases as industry has already gone through vigorous costcutting measures including retrenchments.”

Fapa said 18,530 direct jobs and 129,000 indirect jobs were at stake.

Addressing the mining industry at the Joburg Mining Indaba in 2018, Minerals Council CEO Roger Baxter reportedly said electricity prices in SA had more than trebled, making them unaffordable for the industry.

However, Eskom remains in need of funds. CEO Phakamani Hadebe said on Monday that while a tariff increase may cause hardship, “not being granted a suitable increase could lead to an unsustainable financial position for Eskom, which would put the country in an even [more dire] economic condition”.