South Africa’s Department of Trade, Industry and Competition published its Industrial Development Strategy on 8th June 2026, proposing to attach binding local-processing conditions to the allocation of mineral rights. A company cleared to mine chrome would have to commit to domestic smelting to hold the right, and chrome carries a proposed export tax, a quota, and two processing zones. The strategy is unlikely to expand domestic processing, because it does not address the conditions that make that processing uneconomic: the cost of electricity, the state of freight rail, and a collapse in exploration investment.
Power costs decide the sector
Electricity is the dominant and largely irreducible input in ferrochrome, at an estimated 35% to 40% of production cost, which is why South Africa, the world’s largest chrome ore producer, ceded ferrochrome processing to China. After Eskom tariffs rose more than 900% since 2008, only 11 of 66 smelters were operating by early 2026. The government’s own conduct confirms which variable matters. In April 2026, Eskom set a preferential tariff of 62 cents per kilowatt-hour for the two largest producers, down from the 136 cents in their original agreements, and projects that the lower rate alone will return 45 smelters to operation by December. A strategy that forces more ore into furnaces the state is rescuing through cheaper power has the sequence reversed. An export tax raises the cost of shipping raw ore. It does not lower the electricity cost that decides whether smelting is viable, and that cost lies outside the licensing mechanism.
Logistics outside the strategy
Processing raises a producer’s logistics burden, since alloy, reductants, and inputs all move on the same network that already cannot clear raw tonnage. Transnet rail freight fell from about 226 million tons in 2017/18 to roughly 152 million in 2023/24, and coal exports reached a thirty-year low. The repair underway is unrelated to the strategy. Transnet has granted 11 private operators access to its main export corridors to add capacity toward a 250 million ton target. A beneficiation clause in a mining right adds neither track nor rolling stock.
Indonesia is not a template
Supporters of mandatory beneficiation point to Indonesia, which banned nickel ore exports in 2020 and took its share of the refined nickel market to roughly 60%. That result rested on advantages South Africa lacks. Indonesia also held genuine pricing power in a single commodity with one dominant customer, a position South Africa does not occupy in chrome, where buyers have alternatives. Indonesia holds about 42% of global nickel reserves, drew Chinese capital willing to finance and own the smelters, and supplies them with coal kept cheap by a domestic market obligation that has capped local prices near a quarter of the world rate. Cheap, reliable power is the precondition, and South Africa cannot provide it. The Indonesian record also carries costs its admirers omit. The processing margin accrues largely to foreign owners. The capacity buildout drove the London Metal Exchange nickel price down by roughly 46 percent between 2022 and late 2025, forced refiners to cut output and lay off workers, and pushed Jakarta into production-quota cuts in 2026. Indonesia’s dependence shifted from raw ore exports to foreign capital and a single dominant buyer.
Exploration bears the cost
The deepest damage is to exploration, which supplies the deposits any future processing depends on. South African exploration spending fell for a seventh straight year in 2025, to R738 million, leaving it with under 1 percent of global exploration outlay, down from roughly 5 percent. Its share of African exploration spending dropped from 35% to 7%, and the Fraser Institute’s 2025 survey placed it 64th of 68 on its Policy Perception Index. The cause is regulatory, not geological: an amendment bill that imposed ownership rules at the prospecting stage and then withdrew them, and a licensing system that rejected 700 of 795 prospecting applications in a single year. Exploration capital is mobile, and it has shifted to Zambia and the Democratic Republic of the Congo. Conditioning a mineral right on a processing commitment deepens that uncertainty, converting the right from a property interest into a discretionary policy instrument. With discovery to production averaging about 17 years, ore deterred in 2026 is processing capacity absent in the 2040s. The strategy undercuts the upstream its own goal requires.
The objective is defensible. Raw exports capture little of the value chain, and South Africa needs the jobs that processing brings. The means are mismatched to the conditions. If the chrome export tax arrives before the power, rail, and rights problems are resolved, it will work as a levy on miners that does nothing for smelter restarts, which still turn on the electricity tariff. The strategy can keep the ore at home. It cannot make processing it pay.
Arman Sidhu is an American geopolitical analyst and writer covering commodities markets, international trade, and foreign investment. He is a regular contributor to Geopolitical Monitor and his work has previously appeared in The Diplomat, Eurasia Review, Economic & Political Weekly, and RealClearWorld, among other outlets.
