Highveld Steel looks after retrenched employees
Highveld Steel has paid about R50m to retrenched employees so far and continues to pay them from rentals from the businesses that now occupy the site outside eMalahleni, says Piers Marsden of Matuson & Associates, one of Highveld’s business-rescue practitioners.
Highveld Steel & Vanadium, SA’s second-biggest steel manufacturer after ArcelorMittal SA, was put into business rescue in April 2015 after a prolonged downturn in the steel industry. The collapse of the group, which was majority-owned by Evraz, resulted in the retrenchment of almost 3,500 people, including about 1,800 of its own staff as well as contractors, in February 2016. An initial attempt to sell the business fell through due to soft market conditions and the 50-year-old mill’s significant environmental liabilities.
Marsden, speaking on the sidelines of the official restart of the Highveld Structural Mill, says the total amount owed to employees, who are being paid out first, was originally R300m. An additional R150m is owed to the Industrial Development Corporation and about R2bn to concurrent creditors.
An agreement was reached with ArcelorMittal SA in 2016 to reopen part of the plant. ArcelorMittal SA supplies the primary steel in the form of blooms and slabs, which is processed into supplied at Highveld Structural Mill and marketed by ArcelorMittal SA.
This is a specialised product that was previously fully imported. Making it at the Highveld plant is meeting local needs, saving foreign exchange, using spare capacity at ArcelorMittal SA and saving jobs, Marsden says.
ArcelorMittal CEO Wim de Klerk says the first 4,100 tonnes were produced in April and more than 100 customer orders have been placed so far. Targeted production is 18,000 tonnes a month. This product complements ArcelorMittal’s product range and assists downstream customers, De Klerk says.
Highveld Structural Mill CEO Johan Burger says ArcelorMittal SA has a two-year option to buy the mill that could be extended for another year. The price will be determined by the mill’s profitability, but there is a minimum price.
Marsden says that if ArcelorMittal SA exercises the option to buy the mill it will realise cash to pay creditors. More tenants will be sought to bring in regular income. Other challenges remain, such as addressing environmental issues and resolving a dispute with Air Liquide over a take-or-pay contract, he says.
Marsden expects the business rescue process will take about another two years to resolve but these processes, though taking longer than a scrapping of the plant, will ultimately realise more money for employees and creditors. De Klerk is grateful for government support in this venture, which is helping to sustain the smaller steel fabricators that are employing up to 100 people. This business will continue to increase its capacity.
However, De Klerk says, he is concerned about the lack of capital the government spends on infrastructural development. As a result many businesses are closing down.
About 500 people are working in various businesses on the site, including a black-owned logistics company that uses Highveld’s extensive rail infrastructure to ship coal for small producers in the area
He is also concerned about the number of unemployed.
Marsden says Transnet is expected to issue a tender shortly for rail line supply for 15 years and Highveld Steel is the only serious contender for it. Structural steel is a designated product for local procurement by parastatals.
About 500 people are working in various businesses on the site, including a black-owned logistics company that uses Highveld’s extensive rail infrastructure to ship coal for small producers in the area.
Among the other tenants are a technical training company and a business refurbishing dragline buckets.
Burger says Highveld and ArcelorMittal SA are grateful for the support by the government but the industry needs to be more competitive.
Economic Development Minister Ebrahim Patel says restarting the structural mill reflects a never-say-die attitude on the part of its management and the business rescue practitioners. The global steel industry is going through a turbulent period but this joint venture shows niche opportunities can be catalysed by businesses and the government.
Mineral Resources Minister Mosebenzi Zwane says certain minerals will be designated that the mill can access at mine gate price to ease its difficulties.
The new mining charter will be gazetted next week. It will be a straightforward document, focusing on people working together to transform the country, Zwane says.
No one should expect anything for free, he says.
"You want to be in the mining sector, work for it. We will introduce policies to ensure that once you are ready for it you can take over but don’t mess up.
"We want to forget this issue of black and white but be the rainbow nation and treat each other like that," Zwane says.