Businesses that are key cogs in the minerals and manufacturing sectors are in a standoff with the industry’s union over retrenchments.
Two smelting giants signalled their intention to press on with labour redundancies after the terms of an electricity tariff reduction were allegedly deemed inadequate.
Minister of Energy and Electricity Kgosientsho Ramakgopa improved on an earlier tariff reduction granted by the National Energy Regulator of South Africa (Nersa), but this measure seems to not be enough to halt the job losses.
The National Union of Metalworkers of South Africa (Numsa) on Monday lashed out at Glencore-Merafe and Samancor Chrome for not honouring the proposed deal.
Businesses across the sector are under strain, warning that if greater interventions are not taken, job losses could cascade.
Proposed Eskom deal
Nersa in January approved a 35% temporary tariff reduction for Glencore and Samancor, with Ramakgopa increasing that to a 55% reduction, leaving the tariff at 62 cents per kilowatt hour.
Numsa stated that it was assured by Glencore and Samancor that should the tariff be reduced to 62 cents, the companies would halt the retrenchments.
“Without having any meaningful consultation with the union, both Samancor and Glencore decided to threaten retrenchments.
“They are traumatising workers, as it is their job security that is at stake,” the union stated.
Numsa revealed selected sections of the deal, which showed the companies were offered a five-year fixed-term deal with Eskom that would see the tariffs increase in line with Nersa approvals.
The terms state that should the deal be terminated before the end of the five years, the companies would owe the cumulative difference between the reduced rate and the original rate.
Limitations on dividends and capital distribution would also be in place, as would an “upside sharing and dual recovery mechanism” that would see Eskom benefit from the companies’ recoveries.
“This proposal reflects Eskom’s commitment to supporting strategic industrial customers while maintaining governance integrity, financial sustainability, and fair risk allocation,” the document excerpt shared by Numsa reads.
‘Greed of maximising profits’
Numsa stated that the two businesses were “stubbornly” proceeding with the Section 189 process and negotiating in bad faith.
“It has become clear that employers are using the electricity tariff negotiations as leverage to threaten jobs and extract further concessions from government,” the union stated.
Numsa demanded that the companies return to the negotiating table, scrap retrenchments and open their operations.
“What we expect from employers, given this competitive tariff, is that they must reopen all mothballed smelters, employ workers and create jobs,” it explained.
The union said that refusing to do so was placing profits over workers’ livelihoods.
“We regard such a stance as completely unacceptable and selfish, clearly driven only by a motive of greed or maximising profits,” Numsa concluded.
Reuters reported last week that neither Glencore or Samancor had disclosed the conditions of the deal, but quoted Samancor in stating the terms were “a threat to the long-term viability of the ferrochrome industry”.
Ramakgopa’s office was contacted by The Citizen on Monday and Tuesday for comment on the situation, and its response will be shared should it be forthcoming.
Nersa and Eskom acknowledged queries sent by The Citizen, but a full response had not been received at the time of publication.
Warnings of ‘irreversible’ loss
The industry as a whole was hoping for a sweeping tariff reduction announcement in Finance Minister Enoch Godongwana’s budget speech earlier this year.
Transalloys CEO Konstantin Sadovnik explained that electricity was the single largest input cost that determined the South African company’s ability to compete internationally.
He warned that if the tariff reduction is not extended to the entirety of the ferrochrome industry, job losses will be inevitable.
At least 600 jobs at Transalloys could be under threat, adding to the 1 500 jobs at Glencore, as well as resultant economic loss.
“Beyond the immediate job losses and downstream economic impact, shutting down the [Transalloys] plant would wipe out a R5 billion strategic asset.
“It would represent an irreversible loss of manganese beneficiation capacity in a country that holds roughly 80% of the world’s known manganese resources, and severely damage the investment climate in South Africa,” stated Sadovnik.
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