Intensive energy users warn of industrial jobs bloodbath as Eskom’s tariff increases loom

Banele Ginidza

Intensive energy users in South Africa are sounding the alarm over rising costs and impending job losses, as recent decisions by the National Energy Regulator of South Africa (Nersa) threaten the financial viability of crucial industries.

The Energy Intensive Users Group (EIUG) on Tuesday raised concerns that Eskom's recent settlement of R54 billion electricity price determination could lead to significant increases in electricity tariffs, which already account for up to 40% of production costs for some users.

As a result of the miscalculation, electricity tariffs, which were initially set to rise by 5.4% in 2026 and 6.2% in 2027, will instead spike by 8.8% over the next two financial periods to compensate for the Nersa blunder.

The new tariffs, expected to take effect in the 2026/27 financial year and into the next term (2027/28), are three times higher than the anticipated consumer inflation rate.

EIUG CEO Fanele Mondi stated that price increases, volatility, and uncertainty are major factors contributing to operational shutdowns and low investment levels in the South African market.

"Additionally, there is the matter of reported Regulatory Clearing Account (RCA) settlements which, if true, will be an added burden to consumers, not to mention outstanding RCA decisions that have not been liquidated yet," Mondi said.

"Making the matters even worse is that some operations already see as high as 19% increase against the 12.74% Nersa decision due to the changes in the Retail Tariff Plan. With these additional costs, their situation will get even worse."

The situation was aggravated by Nersa's upcoming incremental tariffs as part of the Multi-Year Price Determination (MYPD6) process, which Mondi argued has not achieved its intended goal of fostering predictability.

Originally, Nersa had approved an allowable revenue of R384.6bn or 12.74% increase for Eskom for the 2025/26 financial year, yet a subsequent adjustment related to Eskom’s judicial review led to a settlement of an additional R54bn over the three-year MYPD6 period.

Eskom's RCA applications are mechanisms by which the utility seeks to recover from or returns funds to consumers based on variances between its costs and revenues and those allowed by Nersa.

Mondi said given all these price uncertainties, EIUG calls on Nersa to consider reopening MYPD6 as an increase of over 4% is a consideration for RCAs.

"In this case, R54bn is also over 4% of the original MYPD6 decision. Such a review may reset the base and afford the industry a starting point for a predictable price path," he said.

"EIUG further calls on Nersa to consider reviewing the MYPD pricing methodology or its implementation, as it has not succeeded by and large in bringing price stability and predictability." 

Concerns shared by major industry players such as Glencore reflect the wider crisis.

In a recent statement, Glencore disclosed plans for significant retrenchments in its Ferrochrome and Vanadium operations linked to the crippling financial pressures of high electricity costs, which have resulted in the suspension of production at some plants.

Production at ferrochrome smelters operated by the Glencore-Merafe chrome joint venture remain suspended.

Glencore said the process will affect the Boshoek and Wonderkop smelters in Rustenburg as well as the Rhovan Vanadium operations near Bethanie and its Carbon Division in Emalahleni, Mpumalanga.

In addition, Glencore envisages reducing the Lion Smelter in Steelpoort to half of its operating capacity. 

"As part of this process, Glencore will also proceed with further streamlining and restructuring of support functions within the Mining division, at Rustenburg and Lydenburg Smelters, Head Office and Shared Services functions as anticipated," it said.

Brandon Horn, head of commercial at SolarAfrica, indicated that the miscalculations by Nersa might lead to increased tariffs in the following financial years—projecting escalations to nearly 9% by 2027/28, well above inflation.

"The latest adjustment under review could see tariffs climb to nearly 9% annually by 2027/28, well above inflation. For large commercial and industrial users, the impact is severe," Horn said.

"A typical Megaflex customer consuming around 10.5 GWh per year faces an extra R2 million in 2026/27, and close to R2.2m in 2027/28, pushing their annual bill up by more than R4.1m by 2028. This kind of volatility makes long-term planning almost impossible."

Labour organisations, including the National Union of Mineworkers (NUM) and trade union Solidarity, have voiced concerns regarding the job market, citing the government’s policy errors as major contributors to the current crisis.

BUSINESS REPORT