Picture: THINKSTOCK
Eskom is not acknowledging is that it has kept the lights on only because many South African industries are in the doldrums. Picture: THINKSTOCK

A DECISION by SA’s competition authorities to lift conditions restricting the movement offshore of Atlantis Metals, a specialised maker of lead anodes used in industrial electroplating, speaks volumes about the poor state of the economy, especially manufacturing.

The decision comes after Atlantis parent Zimco Group told the tribunal that Atlantis had been affected negatively by Glencore’s closure of mines in the Democratic Republic of Congo and Zambia.

The Atlantis plant might now be moved to copper producers Chile or Zambia.

Zimco MD Wouter Verwey says the costs of exporting from SA including freight and port charges, along with import duties in major South American and North American markets, mean Atlantis is uncompetitive running its business in the country. "We are going to go somewhere else — Chile is a possible destination. We … would really like to keep this business South African, even by establishing plants in other parts of the world," he says.

Eskom, in a recent power alert, said that with the exception of two hours and 20 minutes of load shedding, there had been no blackouts for more than five-and-a-half months.

While this is laudable, what Eskom is not acknowledging is that it has kept the lights on only because many South African industries are in the doldrums.

Mines are in care and maintenance, and steel plants including Evraz Highveld Steel and Vanadium and Tata Steel, have shut down operations.

This has saved on a lot of power — to the benefit of Eskom and its tardy maintenance programmes, but to the detriment of the productive economy.

Tata has blamed Eskom’s winter pricing for the shutdown, as well as the low price of high-carbon ferrochrome.

Numerous other ferrochrome smelters are offline and International Ferro Metals, a London-listed producer operating in SA, has gone into business rescue. The company cites Eskom’s expensive and irregular electricity supply, as well as "militant union activity" and state-ordered safety stoppages as compounding the weak prices.

Then there is BHP Billiton, which permanently shut down an aluminium smelter in Richards Bay last year, despite it benefiting from highly favourable electricity pricing from Eskom.

This is why more South African companies — such as AEL Mining Services, one of the biggest suppliers of explosives technology in Africa and a subsidiary of JSE-listed AECI — are focused on expanding abroad. This means they can cut out foreign distribution costs and access dollar markets directly.

"We are now expanding by offering our full suite of products and technical expertise in South America directly to our customers," Alois Kwenda, AEL general manager for business development in South America and West Central Africa, says.

Meanwhile, a group of Port Elizabeth companies — including metals foundries that serve automotive, mining and general industries — have for many years been challenging municipal electricity tariffs in court. They say these are nearly 35% higher than Eskom’s direct customer rates.

Along with the Nelson Mandela Bay Business Chamber, they have told the National Energy Regulator of SA, which has just held a hearing in the city, that the timing of Eskom’s latest application to retrospectively recover R22.8bn from consumers in unanticipated costs is irregular and unlawful.

David Mertens, executive director of Autocast, a Port Elizabeth foundry business that produces engine components for Ford, Volkswagen and Toyota, says that after Eskom applied for a "selective reopener" to the multiyear price determination in May last year, it cannot reclaim monies as an "afterthought".