Kgosientsho Ramokgopa. The proposed plan involves creating a central entity to buy coal at low market-related prices and supply it to underutilised Eskom power stations. Picture: Gallo Images/ Frennie Shivambu Electricity and Energy Minister Kgosientsho Ramokgopa disclosed on Monday (12 December) that government will have to subsidise Glencore and Samancor’s electricity costs by R5.2 billion as part of an interim plan to buy time for a sustainable solution to the high energy costs currently killing the country’s ferroalloy industry.
He was unable to specify where the money will come from but assured that “we will find it”. This comes after Eskom’s announcement of a Memorandum of Understanding (MoU) with Samancor Chrome and the Glencore-Merafe Chrome Venture on 8 December to develop a long-term intervention before the end of February. Ramokgopa explained that the smelters are already paying only R1.35/kWh in terms of negotiated pricing agreements (NPAs).
The normal price would have been R2.12/kWh. Electricity costs account for 40-60% of their total expenses, and even with the discount, they pay three to four times more for electricity than their global competitors. Eskom was prepared to cut the price further to 87.7c/kWh, the National Union of Mineworkers (NUM), which participated in talks about the matter, revealed.
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According to Ramokgopa, the “sweet spot” at which the smelters can survive is between 60c and 70c/kWh. Glencore agreed to pause the Section 189 process it had already initiated, which would have resulted in the loss of 2 500 jobs, pending the finalisation of a long-term intervention before the end of February. To cover the difference between the 87.7c and R1.35/kWh that the smelters are currently paying, the government must now find R5.2 billion, says Ramokgopa. The expected job losses without the intervention will be much wider than Glencore and could amount to 300 000.
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