Rising energy costs threaten industrial base
South Africa's already fragile economy faces mounting pressure from the Middle East conflict, with fuel price increases set to ripple through every sector from mining to household budgets, according to Business Leadership SA chief executive Busisiwe Mavuso.
Mavuso warned that the economic fallout will depend largely on the duration of the conflict, but local businesses are already scrambling to limit the damage. She called on political leaders to partner with the private sector in managing the crisis.
The mining industry stands to take a particularly heavy blow, with diesel-dependent transport by road and rail set to become significantly more expensive, alongside rising operational costs at mine sites. Consumers, too, will feel the pinch directly, with household spending and confidence likely to suffer.
Mavuso expressed alarm at reports that Glencore, which operates one of South Africa's two remaining major ferrochrome plants through a joint venture with Merafe, may walk away from negotiations with government aimed at saving its smelters. As many as 1 500 jobs hang in the balance. Meanwhile, Samancor Chrome, the operator of the country's other large plant, is already proceeding with retrenchments that could affect up to 2 400 workers.
"The tenfold increase in electricity prices since 2008 has already forced many smelters out of business, and the last two large plants are now at risk."
South Africa has surrendered roughly half its share of global ferrochrome production over the past two decades as power costs surged, with unprocessed ore exports increasingly replacing local beneficiation. Mavuso noted that higher diesel prices also inflate the cost of keeping the lights on, since both Eskom and private enterprises depend on diesel-powered backup generation.
She urged government to consider temporarily adjusting the fuel levy, as was done when the Ukraine war began, to cushion the blow. South Africa imports the bulk of its fuel and pays in dollars, meaning any global oil shock is magnified locally by rand weakness and feeds rapidly into inflation. Fuel costs quickly drive up food prices through transport and fertiliser inputs, making the impact especially harsh on poorer households. The fuel tax increases announced in the February budget could also be postponed, Mavuso argued. However, she acknowledged that the country's strategic oil reserves offer little relief, sitting at just two to three weeks' supply compared with the global benchmark of 90 days. Stocks have never been replenished since the Zuma-era decision to sell off 10 million barrels, a move later declared illegal.
Crisis opens doors for ports, tourism and talent
While the threat is real, Mavuso stressed that the disruption also presents significant opportunities for South Africa. The Cape sea route is expected to see a sharp uptick in vessel traffic as shipping lines steer clear of both the Red Sea and the Strait of Hormuz. Port performance has already improved markedly, with handling times at Durban dropping from 21 days to just two days over the past year.
"Every ship we can service efficiently is revenue and jobs we desperately need."
She also pointed to the potential for South Africa to attract businesses and skilled workers displaced from Gulf hubs such as Dubai and Qatar, where expatriate families are evacuating and companies are relocating staff. Sharing a time zone with the region and possessing established infrastructure, Cape Town and Johannesburg should move decisively to draw that talent and those operations, she argued. The global conference and events industry, seeking destinations free from airspace disruptions and security threats, represents another opening.
Tourism stands to benefit similarly, as travellers who had planned visits to the Middle East seek alternative destinations. Mavuso cautioned, however, that these windows will not remain open indefinitely, with rival destinations already jockeying for position.
On the diplomatic front, she called for a pragmatic approach focused on securing alternative oil supplies and the industrial chemicals that local manufacturers rely on. Foskor requires sulphur and ammonia, while the plastics sector depends on polyethylene imports. Supply constraints threaten to push costs higher across the entire industrial base.
"What matters is whether we use it to build resilience or simply endure it. Government must move quickly on fuel levy relief. Business must accelerate contingency planning and supply diversification. And together, we must seize the opportunities this moment presents."
Mavuso concluded that when global markets eventually stabilise, South Africa must emerge from this period of turbulence in a stronger position than before, not a weaker one.
