South African firms facing high power costs thrown a lifeline

South Africa has softened its anti-trust regulations to allow firms battling high power costs to jointly build energy infrastructure and collectively negotiate supply contracts.

South Africa’s trade minister Parks Tau said in a government notice seen by Reuters on Wednesday that the new measures were meant to assist distressed industries.

Electricity costs in South Africa have risen by more than 900% since 2008, the country’s Minerals Council says.

Smelters and steelmakers in Africa’s most advanced economy are struggling to survive the impact of high power prices, compounded by competition mainly from China, whose industry enjoys significantly lower electricity costs.

South Africa’s government is working on a package of measures, including lower tariffs charged by state-owned power utility Eskom, to provide relief to the distressed firms.

The new regulations amend anti-trust law to allow firms to collaborate to “secure back-up or alternative energy supply, reduce energy costs and secure shared or adjacent sites, infrastructure, equipment and facilities”.

South Africa, the world’s top producer of chrome ore, also used to be the biggest global producer of ferrochrome, a combination of chrome and iron, but lost that position to China, mostly due to high electricity costs.

Several energy-intensive smelters and furnaces, including ArcelorMittal South Africa’s long-steel works and a ferrochrome business partly owned by Glencore, have had to mothball operations and lay off hundreds of workers.

Transalloys, which operates South Africa’s last functioning manganese smelter, said on December 30 it may have to close the plant and cut hundreds of jobs due to high power prices.

• Reporting by Sfundo Parakozov in Johannesburg and Nelson Banya in Harare.