Glencore-Merafe chrome smelter deal with Eskom hits a snag

The National Union of Metalworkers of SA (Numsa) has come out swinging against both the Glencore-Merafe joint venture and Samancor for pursuing retrenchments while the chrome smelter operators are negotiating a 62c per kilowatt hour (kWh) tariff with Eskom.

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Government and Eskom have agreed to reduce the tariff to 62c, roughly half of what it was a year ago, to bring 45 currently idle smelters back online.

But the devil is in the detail.

Glencore-Merafe has delayed the implementation of its Section 189 retrenchment process until 31 March, pending agreement on the terms and conditions of the new tariff – still to be signed off by the National Energy Regulator of SA (Nersa).

“As a union, we regard this unfolding crisis in the ferrochrome sector as a deepening, coordinated assault on workers, as it has become clear that employers are using the electricity tariff negotiations as leverage to threaten jobs and extract further concessions from government,” says Numsa general secretary Irvin Jim.

“Numsa wants to be upfront that we will not allow any company to retrench any worker after they have been granted a 62 cent electricity tariff, and [if] employers are not careful, they will be leaving us with no option but to interdict such intentions to retrench our members.”

The trade union has called on employers to withdraw all Section 189 notices (in terms of the Labour Relations Act), reopen mothballed smelters, and get back to the negotiation table.

Read:
Samancor Chrome set to cut 2 500 jobs, union says
Glencore-Merafe retrenchments are another casualty of Eskom
Pressure mounts on Eskom pricing as more retrenchments loom

Glencore has confirmed it is in discussions over the terms and conditions attached to the 62c electricity tariff, though government and Eskom want these conditions to be agreed with Nersa prior to implementation.

Several of these conditions, if implemented, would make the tariff solution unworkable, Glencore said in a statement.

“In order for the terms and conditions to support the long-term viability of our ferrochrome operations, [they] must be reasonable and commercially sound to sustain stable production over time.

“The current conditions attached to the approved tariff solution, unfortunately, do not allow us to reopen our smelters on a competitive basis.”

Read:
Key ferrochrome bastion buckles under SA energy costs
Nersa approves cheaper electricity for Amsa

The company has submitted a final counter-proposal to Eskom, which it believes strikes a balanced and sustainable outcome for reopening the shuttered smelters.

Glencore says it has continued to pay employees affected by the mothballed smelters since operations were suspended in April 2025.

Unless an agreement is reached with Eskom on commercially viable terms, and subsequently approved by Nersa, the company says it will have no option but to proceed with retrenchments.

What are the terms?

Numsa has outlined the proposed terms of the deal with Eskom, chief among them:

• A five-year fixed-term contract: Transitioning from interim relief to standard cost-reflective pricing, with tariffs escalated annually to align with Nersa-approved adjustments.
• Deferred revenue recovery mechanism: If the agreement is terminated by the customer before the five-year term ends, Eskom is entitled to recover any revenue foregone as a result of the discounted tariff on a sliding scale.
• Upside sharing and dual recovery mechanism: Eskom participates proportionately in any commodity price recovery as well as profit margin improvements.
• Dividend and capital distribution restrictions: During the support period, the company may only declare dividends or distribute capital once the deferred revenue has been settled in full, prioritising balance sheet stability and repayment discipline.
• Security and financial safeguards: All security guarantees must remain valid and up to date.
• Take-or-pay commitments: The company must agree to either consume or pay for 80% of its contractual or normal electricity volume (the current take-or-pay level is 70%).

Numsa says it does not understand why Glencore opposes these conditions and continues to threaten retrenchments.

Electricity Minister Kgosientsho Ramokgopa is keen to finalise the deal, saying it will protect jobs, boost exports by R76 billion, add nearly R18 billion in revenue to Eskom, and bring in a further R5.5 billion in tax.

Read: Big drop in electricity tariffs may rescue SA’s collapsing chrome smelters

The reduced tariff is aimed at rescuing SA’s collapsing ferrochrome smelters, with just 11 of 66 currently operational.