Steel coils. Picture: BLOOMBERG
Steel coils. Picture: BLOOMBERG

During his state of the nation address earlier in the year, President Cyril Ramaphosa referred to a steel master plan to save the steel industry from its rapid decline. However, if this proposed master plan is implemented it will greatly accelerate the de-industrialisation the steel industry is already experiencing.

The unintended consequences will be immense, achieving exactly the opposite of what the president may have in mind.

In a recent opinion piece in Engineering News, Charles Dednam, a former ArcelorMittal SA employee, now general secretary of the ArcelorMittal-sponsored SA Iron and Steel Institute, expressed the necessity for trade measures (import duties on raw material to protect ArcelorMittal). In addition to this, the department of trade and industry, and competition’s proposed master plan, drafted by Dednam, is (not surprisingly in light of his close connections to ArcelorMittal), riddled with support for import duties to protect the company.

In his article, Dednam could not ignore the indisputable fact that the steel industry’s main challenge is its uncompetitiveness. He consequently concluded that competitiveness constitutes the master plan’s top priority. However, he also emphasised the importance of the continuation of import duties (protecting the ArcelorMittal steel monopoly), a measure currently preventing the downstream manufacturing industry from having access to cost-effective input material for their production processes, which already renders the steel industry uncompetitive.

Dednam’s admission that competitiveness is of critical importance for the survival of the steel industry therefore directly contradicts his proposed intervention of continuing import duties to protect ArcelorMittal. Over the past decade, the the steel industry employment figures have dropped drastically. Since 2015, when the duties were imposed, close to 1,000 companies have been liquidated. In addition to this, more than 300 companies have been put into business rescue.

The protection of ArcelorMittal is not solely responsible for this, though it is a major contributor to the industry’s woes. The government’s commitment to protect ArcelorMittal, regardless of the devastating impact it has downstream, remains a mystery.

These duties are only delaying the inevitable, as far as ArcelorMittal is concerned, while the downstream sector is severely prejudiced. If these duties had not been introduced:

  • ArcelorMittal would still have existed, albeit not in its current form and definitely not as a monopoly. 
  • Tens of thousands of jobs would not have been lost.
  • The steel industry would have adapted to the logistical constraints associated by importing raw material for production. 
  • The industry would have been more competitive.
  • Many of the companies that were liquidated would still have contributed to the preservation of the SA steel industry.

The problem with the steel master plan is that it addresses all kinds of issues but not the two main causes of the devastating de-industrialisation (the decline of business and job losses) plaguing the steel industry:

  • The custom  and safeguard duties protecting the failing ArcelorMittal steel monopoly.
  • The current labour-law dispensation, which facilitates the once powerful Steel and Engineering Industries Federation of Southern Africa and the National Union of Metal Workers of SA’s impact on, particularly, small, medium and micro-enterprises in the steel industry, and their wage agreement, which provides for an outrageous minimum wage (currently R11,500 cost to company) against which the industry constantly needs to defend itself.

In response to the proposed steel master plan, the National Employers Association of SA’s approach is simple: scrap these industry-, business- and job-destroying duties.

• Papenfus is CEO of the National Employers Association of SA.

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