The possible expiry of Mozal Aluminium’s electricity tariff agreement is not a distant policy concern. It is a near-term test of how South Africa manages industrial competitiveness in an economy where power costs increasingly decide who survives and who shuts down.
Mozal, located in Mozambique but tightly linked to South Africa’s industrial system, is one of the region’s largest aluminium smelters. Its operations support an estimated 22,000 downstream jobs in South Africa across metal fabrication, transport, maintenance, engineering services and export logistics. When Mozal’s electricity pricing comes under pressure, the impact does not stop at the plant gate.
Electricity is the single most important cost input for aluminium smelting. Power can account for more than a third of total operating costs. For energy-intensive industries, small changes in tariff structures can determine whether production remains viable or becomes loss-making. This is why Mozal’s long-standing power arrangement has always been strategic rather than incidental.
South Africa is already experiencing the consequences of rising electricity prices. Over the past decade, escalating tariffs and supply instability have pushed several manufacturers to scale down, relocate or shut operations altogether. The result has been a gradual erosion of industrial capacity, particularly in sectors that depend on stable, predictable power.
Mozal sits at the centre of a regional value chain that South Africa has struggled to deepen through local beneficiation. Aluminium processed at the smelter feeds South African firms that convert it into components for construction, packaging, automotive manufacturing and export markets. If the smelter were to be mothballed, these downstream businesses would face higher input costs, supply uncertainty or outright loss of material access.
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That risk comes at a time when South Africa’s unemployment rate remains structurally high and industrial job creation is limited. Manufacturing employment, once a reliable absorber of semi-skilled labour, has been declining. Losing a large anchor customer like Mozal would further narrow the base on which industrial recovery depends.
The issue also exposes a broader policy dilemma. South Africa’s electricity system must balance financial sustainability, infrastructure investment and affordability. Yet when tariff design treats industrial users as a revenue backstop rather than economic partners, the long-term costs show up in lost production, weaker exports and reduced tax revenue.
Short-term interventions to secure Mozal’s continued operation may be necessary, but they are not sufficient on their own. Any temporary tariff relief must be clear in scope and tied to outcomes such as job retention, production volumes and downstream supply commitments. Without these conditions, support risks becoming an open-ended subsidy with limited economic return.
More importantly, Mozal’s situation highlights the need for a coherent industrial electricity strategy. South Africa cannot plan for re-industrialisation, regional trade expansion or value-added manufacturing while treating power pricing as a purely administrative exercise. Energy policy and industrial policy are inseparable.
By Thuita Gatero, Managing Editor, Africa Digest News. He specializes in conversations around data centers, AI, cloud infrastructure, and energy.
