Eskom Offers Mining Giants 2012 Electricity Prices While Ordinary Households Pay Seven Times More

• Eskom has struck new price deals with two major ferrochrome companies that will see them pay electricity rates not seen since 2012
• The Negotiated Price Agreements with Samancor Chrome and Glencore Merafe will see both companies pay 62 cents per kilowatt-hour for five years
• Energy experts have raised questions about who will foot the bill for the steep discounts, with concerns that ordinary consumers and taxpayers could end up covering the shortfall
• Briefly News spoke to entrepreneur Rajesperi Naidoo on why Eskom would negotiate lower electricity prices with large mining companies while households continue to pay higher rates

Nerissa Naidoo, a journalist at Briefly News since 2024, previously worked as an editor, content creator, researcher, and ghostwriter before joining the team.

SOUTH AFRICA — Eskom is offering two of its biggest customers electricity at a fraction of what households across the country pay each month, and the gap is quite big.

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According to a report by MyBroadband, the power utility has agreed to sell electricity to ferrochrome producers Samancor Chrome and Glencore Merafe at just 62 cents per kilowatt-hour for the next five years. To put that in perspective, a typical Homepower residential customer currently pays around 438 cents per kilowatt-hour, which is seven times the rate being offered to the two smelters.

Why Eskom made the deal?

The two companies argued that electricity makes up roughly 40% of their operational costs. They shared that Eskom's steep price increases had made their locally produced products too expensive to compete on the global market. Both firms warned they would be forced to shut down their smelters if they had to keep paying the current rate of 136 cents per kilowatt-hour under their existing agreements.

Together, Samancor Chrome and Glencore Merafe use about 12,800 gigawatt-hours of electricity per year. This is around 7% of Eskom's total annual sales. Eskom argued that the utility would be worse off financially if the smelters closed entirely, making the discounted deal the lesser of two financial headaches.

Who pays the difference?

The big question hanging over the deal is how the gap between what the smelters pay and what it actually costs Eskom to generate electricity will be covered. As shown in the report, Eskom spent an average of 147 cents per kilowatt-hour to produce electricity in its 2025 financial year and has set a target cost of 162 cents for 2026. Selling at 62 cents means the utility is selling well below its own cost of production.

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Eskom has said the deal will not be passed on to other customers, but has not explained how that will work in practice. Previous agreements of this kind have effectively been carried by standard-rate customers, including small businesses and households that do not qualify for subsidies.

Electricity Minister Kgosientsho Ramokgopa has ruled out using taxpayer funding and instead pointed to a solution involving low-cost coal power, though no further details have been shared.

Speaking to Briefly News writer Nerissa Naidoo, entrepreneur Rajesperi Naidoo explained why Eskom would negotiate lower electricity prices with large mining companies while households continue to pay higher rates:

“From a business perspective, Eskom is trying to keep major industrial clients operating because they contribute significantly to the economy and energy demand. If companies like these shut down, it can lead to job losses, reduced economic activity, and an even bigger financial gap for Eskom. While it may seem unfair, the decision is often based on keeping large-scale operations running to avoid wider economic damage.”

Briefly News also asked whether these types of deals are beneficial in the long term and what impact they may have on ordinary consumers. Rajesperi Naidoo explained:

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“These agreements can be beneficial in maintaining key industries and protecting jobs, but they also raise concerns about fairness and sustainability. If not managed properly, the cost difference may indirectly affect other customers over time. It brings awareness to the importance of transparency and balanced policies to ensure that while big industries are supported, households and small businesses are not unfairly burdened.”

Other Eskom stories

• Briefly News recently reported that hundreds of mineworkers marched through Johannesburg to oppose Eskom's unbundling.
• Diepkloof Hostel residents spent days without power after it came out that the City of Johannesburg had not paid Eskom nearly R20 million.
• A Western Cape court ruled that Cape Town's fixed electricity tariff rate was unlawful, handing a victory to Afriforum and the South African Property Owners' Association.

Source: Briefly News