Electricity is no longer just an infrastructure issue in South Africa. It has become a pricing problem with macroeconomic consequences, shaping industrial competitiveness, investment decisions, and the country’s ability to extract value from its natural resources.
Speaking from the World Economic Forum in Davos, Electricity and Energy Minister Kgosientsho Ramokgopa framed the issue bluntly: South Africa’s energy transition, industrial recovery, and investment credibility now rise or fall on the cost of power.
Recent stabilisation at Eskom has reduced the frequency of outages, but reliability alone is no longer enough. The focus has shifted to affordability, particularly for energy-intensive sectors that anchor exports, jobs, and downstream manufacturing.
The investment paradox
South Africa is aggressively marketing itself as an energy transition destination, backed by the $12.8 billion Just Energy Transition Partnership pledged by international partners. On paper, the facility is meant to accelerate grid expansion, renewable capacity, and coal-region transition programmes.
In practice, however, Eskom and the government are reassessing whether the financing makes economic sense. The concern is not political alignment or climate ideology. It is the cost of capital.
Electricity tariffs ultimately reflect financing terms. If transition funding is priced above what Eskom can raise through conventional debt markets, those costs are passed directly to consumers and industry. Ramokgopa confirmed that Eskom is benchmarking the partnership’s terms against market borrowing and, at present, the comparison is not favourable.
Grant funding has supported planning and policy work, particularly in Mpumalanga, but large-scale project finance has yet to flow. Until pricing improves, South Africa is unlikely to commit fully to facilities that raise tariffs rather than reduce them.
Mining, beneficiation and power costs
Nowhere is the electricity pricing problem more visible than in mining and minerals beneficiation.
Electricity accounts for up to 45% of fixed costs in ferrochrome smelting. South African producers face power prices roughly double those paid by Chinese competitors. The result has been a steady erosion of domestic beneficiation capacity, with smelters closing despite South Africa holding more than 80% of global chrome reserves.
The economic cost is substantial. Raw chrome ore exports fetch about $150 per tonne, compared with over $1,100 per tonne for beneficiated ferrochrome. The price gap represents lost value, lost industrial capability, and lost employment.
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Government is now working on a targeted electricity pricing intervention for the ferrochrome sector, involving Eskom, mining companies and labour. The objective is to restore global competitiveness without transferring the cost burden to households or non-industrial users.
Ramokgopa was clear that broad tariff subsidies are not an option. Any relief must be narrowly structured, fiscally neutral, and tied to production and employment outcomes.
Electricity as industrial policy
The shift marks a broader change in how electricity is being treated—less as a utility service and more as a strategic input.
South Africa’s ability to attract manufacturing investment, retain mineral beneficiation, and participate meaningfully in the global energy transition depends on one variable above all others: the price of electrons.
Reliability bought time. Pricing will determine survival.
As global energy markets fragment and capital becomes more selective, South Africa’s electricity strategy is moving from ideology to arithmetic. The numbers now matter more than the narrative.
By Thuita Gatero, Managing Editor, Africa Digest News. He specializes in conversations around data centers, AI, cloud infrastructure, and energy.