South Africa’s chrome paradox: Rich in the ground, losing the profit at the factory

South Africa holds over 72% of the world’s chrome reserves, but whether it can profit from turning that chrome into finished metal now depends on electricity costs, not how much chrome is in the ground. EBC Financial Group (EBC) says the recent electricity discount for ferrochrome producers, the companies that turn raw chrome ore into metal, raises a question that goes well beyond the smelting industry. The deal centres on a discounted electricity rate of 62 South African cents per kilowatt hour (62c/kWh) for Samancor Chrome and the Glencore-Merafe Chrome venture. South Africa’s factories now have a full year of uninterrupted power behind them, after Eskom reported 365 days without load-shedding on 16 May 2026.

The deal centres on a discounted electricity rate of 62 cents per kilowatt hour (62c/kWh) for Samancor Chrome and the Glencore-Merafe Chrome venture. Eskom said the discounted rate was agreed in April and needed approval from the National Energy Regulator of South Africa (NERSA). Eskom argued the deal would help it stay financially stable without raising electricity prices for other customers, borrowing more money or needing further government support. NERSA later approved the discounted rate, with Eskom saying that the regulator confirmed the 62c/kWh price for ferrochrome producers.

David Precious, Senior Market Analyst at EBC Financial Group, said, “South Africa has stabilised its power supply, but stable supply is no longer the finish line. For industries that use large amounts of electricity, the next test is price. Ferrochrome is the clearest example because it shows whether South Africa profits from its own minerals or lets other countries do the manufacturing and take the money.”

Glencore’s South African ferrochrome unit cancelled planned job cuts affecting up to 1,500 workers after the electricity cost relief. The government also reported that only 11 of South Africa’s 66 smelters remain operational, showing how far the sector has already shrunk. For chrome-linked towns in provinces such as North West and Limpopo, the risk extends beyond direct smelter jobs to contractors, transport providers, maintenance firms and household spending.

Stable power is not enough if factories cannot afford it

South Africa’s electricity supply has improved because Eskom has avoided load-shedding for a full year. Eskom reported on 16 May 2026 that the country had reached 365 days without load-shedding, the first such full-year milestone since September 2018. But ferrochrome shows why a reliable grid is only the first step, not the finish line.

Ferrochrome is produced by smelting chrome ore and is mainly used in stainless steel and speciality steels. Electricity makes up roughly 52% of the cost of producing ferrochrome, according to figures presented at a public regulatory hearing. That is why the price Eskom charges can decide whether running a smelter makes financial sense at all.

If electricity is too expensive, South Africa can still mine chrome ore, but the more valuable factory work moves offshore. The result is fewer industrial jobs, weaker local manufacturing and less export value from the same mineral base. This is the chrome paradox: South Africa has the ore, but high electricity costs can stop the country from turning that ore into ferrochrome, the more valuable finished product, at home. Merafe Resources’ 2025 operating context said South Africa supplied about 1.6 million tonnes (Mt) of global ferrochrome production of 15.9Mt in 2025, while holding over 72% of the world’s chrome reserves. The same report said China imported about 19.6Mt of chrome ore from South Africa in 2025, up from 17.0Mt in 2024.

“The issue is not that China buys chrome ore. Rather, it is whether South Africa is just selling the raw material while other countries retain the earnings from the more lucrative manufacturing activities and processes,” said Precious.

The 62c/kWh deal tests a wider industrial choice

Large smelters are receiving cheaper electricity at a time when households and smaller businesses remain sensitive to power prices. Critics can reasonably ask who else qualifies, how the process is overseen, and whether other struggling industries would now line up for the same deal.

Eskom and ferrochrome producers have argued that the discount is designed to keep smelters as paying customers, keeping electricity flowing and revenue coming in, rather than a straightforward handout. At the public regulatory hearing, Eskom warned that losing 12.8 terawatt hours (TWh) of annual electricity demand from smelters could cost it revenue, leave power stations underused and ultimately push electricity prices higher for households and other businesses.

If this pricing framework is implemented well, South Africa may keep more factories open, protect jobs and export more finished metal. If it fails, the country risks remaining a raw-material exporter despite owning the resource base. If the process is not transparent, it could become politically contested and harder to repeat for other strategic industries. If the pricing model is miscalculated, Eskom, households or smaller businesses could end up paying more.

What this means for mining shares, the Rand and chrome-linked stocks

Fund managers and equity investors with exposure to South African mining shares, the rand or chrome-linked stocks are watching more than global ferrochrome demand. Investors may consider monitoring whether South Africa earns from processing at home, as this could influence sector fundamentals. Cheaper electricity keeps smelters running. Running smelters produce more ferrochrome. More ferrochrome means South Africa exports finished metal instead of raw ore. That shift means more mining revenue, more factory jobs, more freight moving through ports and stronger confidence in the economy.

Whether more smelters reopen, or more close, would move the South African rand (ZAR), Johannesburg Stock Exchange (JSE) mining shares, ferrochrome producers, transport and freight companies and electricity-heavy manufacturers. Many factors influence currency and equity markets; electricity pricing is only one variable. If stronger commodity demand does not lead to more local processing, South Africa earns less from the boom. Availability got the lights on. Affordability decides whether the factories follow.

“For the ZAR, JSE mining shares and chrome-linked exporters, what matters is whether South Africa earns from its own minerals,” Precious added. “Every tonne of chrome ore exported raw is a factory shift that happened somewhere else. Mineral wealth only means something if it becomes higher-value exports, factory jobs and a stronger rand. If South Africa mines the ore but loses the profit from turning it into metal, investors would see that the country’s natural wealth is not translating into real economic value.”

The question South Africa now faces is whether it can price electricity in a way that keeps factories open, protects jobs and ensures the profitable work happens at home, without making power more expensive for everyone else. South Africa has the ore, the smelting capacity and now a year of stable power. What happens next with electricity pricing would show whether that adds up to an industrial recovery or just a better-lit version of the same problem.