South Africa has begun easing the application of its competition laws in an effort to help energy-intensive industries survive an electricity crisis that continues to strain large parts of the economy.

The Department of Trade, Industry, and Competition introduced a targeted legal exemption in 2023 under the Competition Act.

The exemption allows firms in industries classified as in distress to co-operate on energy-related solutions without breaching competition law. The policy rationale was that, under conditions of chronic power shortages and sharply rising electricity prices, strict enforcement of competition rules could accelerate closures rather than preserve productive capacity.

On 5 January, Trade and Industry Minister Parks Tau extended this framework through a further determination published by the department. The expanded exemption permits deeper forms of co-ordination, subject to oversight by the Competition Commission, where an industry faces the risk of large-scale failure. The move is widely understood to be aimed at stabilising South Africa’s ferrochrome sector, one of the country’s most electricity-dependent industries.

Ferrochrome is a critical input for stainless steel, providing strength, shine, and corrosion resistance.

Ferrochrome producers are under severe pressure. Samancor Chrome has warned that it may cut up to 2 500 jobs this year, citing electricity costs as the main driver. Power costs can account for as much as 60% of total production expenses for smelters, leaving margins highly sensitive to Eskom tariffs and supply disruptions.

Glencore has also announced the closure of several South African smelters and significant retrenchments. The company has confirmed the shutdown of 10 of its 22 furnaces and the loss of roughly 1 500 jobs at operations in Rustenburg and Lydenburg, with electricity prices again cited as a key factor undermining viability.

Analysts say that the crisis in the ferrochrome industry has been brought about largely by climate activists and European diplomatic lobbying that has deterred South Africa from fully exploiting its coal-fired energy grid.

South Africa’s global position in ferrochrome has been corroding for more than a decade. China overtook the country in refining and smelting output in 2012. More recently, regional producers such as Zimbabwe have expanded capacity, while other Southern African countries are exploring similar moves up the value chain. As competitors grow, South Africa risks losing both employment and market share in a sector it once dominated.

Under the revised exemption, qualifying firms can jointly negotiate electricity purchases, co-own backup or alternative generation, and co-ordinate with energy suppliers.

Frans Cronje told The Common Sense that the current crisis was largely avoidable. He argued that greater urgency in refurbishing South Africa’s ageing coal fleet could ease supply pressures.

According to Cronje: “Refitting existing plants could be relatively quick and affordable, with the potential to add several gigawatts back to the grid. Electricity prices are rising because supply is tight. If you want to manage prices, you either cut demand or increase supply. South Africa still has room to do the latter.”