The Congress of South African Trade Unions (Cosatu) has called on the government to sort out Eskom’s financial woes to save jobs and create new opportunities.
Cosatu was reacting to the company Transalloys’ announcement that, due to “unaffordable” higher electricity prices, it was planning to shut down some of its Mpumalanga-based operations – a move that will lead to a retrenchment of about 600 employees and negatively affects an estimated 7 000 livelihoods linked to the smelter and the broader eMalahleni economy via its supply chain.
Transalloys is a major producer of manganese ferroalloys on the African continent, operating on the Mpumalanga Highveld.
Cosatu warns that soaring Eskom tariffs threaten jobs
Cosatu’s parliamentary coordinator, Matthew Parks, said the organisation was concerned about the announcement as the country has a high unemployment rate.
“This is a matter of great concern to Cosatu. With a 42.4% unemployment rate, we can’t afford to see a single worker retrenched.
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“We are also deeply concerned about the prospect of losing further smelters and the impact that has on our industrial capacity and downstream jobs,” Parks said.
“We are engaging in this matter with the leadership of Eskom, the Presidency and department of trade, industry and competition, as well as other relevant stakeholders. A mutually affordable short-term tariff agreement between Eskom and Transalloys, similar to that reached with Samancor and Glencore, is needed as a matter of urgency.”
Parks has urged all parties to expedite engagements and find a mutually affordable tariff agreement.
Transalloys signals closures in Mpumalanga
As a long-term plan, Eskom needs support from the state to plug its financial leakages from corruption to wasteful expenditure, as well as support to enter the renewable energy space and, most critically, to ensure that all its customers are moved to prepaid meters, he said.
“These are key to ending Eskom’s dependence on increasingly unaffordable tariff hikes. If this can be done, it will play a major role in not only saving these jobs and companies but also unlocking economic growth and creating new jobs.”
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Transalloys chief executive Konstantin Sadovnik said the smelter has no choice.
“We regret placing this level of uncertainty on our employees and their families at this time, but the ongoing lack of clarity around our operating environment leaves us with no responsible alternative.”
The company cannot sustain operations because energy was their biggest cost driver, Sadovnik said.
Company cannot sustain operations
“At current Nersa-approved tariffs, we are competing against international smelters whose electricity costs are roughly half of ours. That gap makes sustained operation impossible.”
Throughout the year, Transalloys operated intermittently as negative operating margins and sustained cash-flow pressure made continuous production impossible, he said, adding the plant currently runs only two of its five furnaces.
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According to Sadovnik, current market conditions, including exchange-rate pressures against the dollar and euro, have made manganese beneficiation in SA fundamentally unsustainable.
While Transalloys has previously welcomed the government’s efforts to develop a sustainable energy pricing framework for energy-intensive smelters, the absence of certainty has now become the cost that threatens the business, Sadovnik said.
Based on the information available, the proposed blueprint solution for ferrochrome smelters, at preferred pricing levels, would be the correct solution for Transalloys.
Proposed blueprint solution
“This could preserve what remains of manganese beneficiation, with the potential to stabilise and even grow employment.”
Sadovnik, however, warned that uncertainty around implementation, timing and the current exclusion of manganese smelters in discourse was eroding the company’s ability to protect jobs.
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“Transalloys is hopeful that the issue will be resolved in the next two months and that implementation will be swift. Without that certainty, the company will have no option but to proceed with restructuring around February.”
Sabelo Mnguni, a national coordinator for the Mining Affected Communities United in Action (Macua), notes with serious concern Transalloys’ announcement that it has issued a Section 189 notice placing hundreds of workers’ livelihoods at risk.
“Macua recognises the devastating impact that retrenchments would have on workers, their families and surrounding communities. However, this crisis cannot be reduced to jobs alone. The downsizing or possible closure of a large manganese smelter carries profound community and environmental consequences that must be addressed openly and responsibly.”
Companies invoke crisis conditions to withdraw jobs
Mnguni said across the minerals sector, Macua has documented a recurring pattern where companies invoke crisis conditions to withdraw jobs while communities are left with environmental damage and broken promises.
Mining expert David van Wyk said the retrenchment follows the government’s announcement of a possible 25% tariff on the export of chrome.
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“The iron, steel, and ferrochrome industries have collapsed in South Africa. In the meantime, Zimbabwe will be erecting a mega steel production plant right next door.”
