ArcelorMittal SA’s collapse highlights need for industrial policy reform

SA’s largest steelmaker, ArcelorMittal SA (Amsa), announced it was shutting down its long steel business and closing its plants in Newcastle and Vereeniging. Amsa initially deferred closing down due to a potential undertaking by Transnet in early 2024; however, it was forced to close shop after government failed to follow through.

The steel plants’ closure is a symptom of SA’s more significant failings: unreliable and expensive electricity generation, deteriorating logistics particularly freight, weak economic production and growth, and policy uncertainty.

Even under the new government of national unity (GNU), policy paralysis and inaction continue to grip our state institutions, and our core industries fail to receive the necessary support despite persistent cries for help. 

The closure of Amsa’s long steel operations will cause the loss of 3,500 jobs; however, the wider fallout will spread across the SA economy. Amsa is a key player in SA’s crucial long steel industry, producing wires, rods, rails and bars. These steel products are used in vital sectors like construction, transport, mining and manufacturing — all of which will suffer due to the closure at Amsa.

According to Justin Corbett, CEO of Rand York Casting, an additional 50,000 jobs in SA could be shed in the short term, while more than 100,000 jobs are at risk in the medium term. 

The closure of Amsa’s facilities will not stem demand for steel but will increase the accompanying financial, human and climate costs. SA will likely import more goods from China instead of domestically produced steel.

This continues a trend where SA exports relatively cheaper unrefined products and imports the more expensive refined and secondary goods at a premium. The trend is especially prevalent in the mineral and mining sectors. Importantly, this need not be the case. 

SA could improve the process by refining extractive sector goods and adding more value before exporting them. This will increase financial revenues, improve the current account balance, and create more jobs in the country.

Furthermore, steel is a very carbon-intensive industry. Exporting raw iron ore and importing refined steel creates more greenhouse emissions due to the requisite maritime transport. Therefore, refining iron ore domestically is cheaper, less carbon-intensive, and creates more jobs than importing steel from China. 

SA is far from eliminating its need to import secondary and manufactured goods. However, it could reduce this reliance by enhancing our local industries. For SA to grow and develop we must prioritise our domestic sectors, create a business-friendly economy and policy environment, use our competitive advantages and industries, and get South Africans back to work.

SA industries are hampered by policy uncertainty, worsening logistics, weak growth and high interest rates. While electricity generation has improved and load-shedding has paused for nearly 300 days, years of blackouts have damaged our local manufacturing capacity and trust in government.

Furthermore, SA’s electricity supply remains constrained, and the power grid will struggle to support rising industrial production and economic growth. For industries to thrive in SA government must — at a minimum — get the basics right and ensure our services can support a growing economy. 

The closure of the plants in Newcastle and Vereeniging is like seeing a car crash in slow motion. Amsa gave ample warnings and called for help, yet government stood on the sidelines and did nothing to avert the crisis. The public and private sectors must work together for the country to succeed, and government needs to do its part in prioritising our industries and helping businesses flourish.

Following the loss of thousands of jobs in the UK steel sector, on January 7 the UK government announced the formation of a new Steel Council. This council includes representatives from the public and private sectors, and is tasked with supporting, steering and revitalising the steel industry in the UK.

It is not too late for the SA government to take similar steps and intervene, but time is of the essence. Importantly, this entity must be a body with real teeth to succeed. 

Since the late 2000s, the government has allowed cheap Chinese goods to flood our markets, wiping out much of SA’s manufacturing base and industries. SA has not recovered from this shock, and our trade deficit with China continues to grow while SA deindustrialises. 

SA is a middle-income country, and manufacturing and industrial production should drive higher levels of growth. However, economic growth has trailed population growth over the past decade. Consequently, the average South African will be poorer in 2025 than in 2015. For the country to succeed, SA must redevelop its industrial base, ramp up manufacturing production and increase exports.

Rebuilding our industrial base is essential, but to harness the full benefits government must support and prioritise SA’s domestic sector and key industries. In SA and the US the steel industry is a strategic sector that supports other core industries such as manufacturing, transport and construction. Yet SA industries are out in the cold, with little support from government.

On January 4, following the potential acquisition of US Steel by Japan’s Nippon Steel, US president Joe Biden blocked the purchase due to “security concerns” and the possible detrimental effect on US manufacturing. The SA government must take explicit steps to bolster and support the country’s industrial base, and prioritising our key sectors is an essential first step.

Finally, SA industries need better regulations and support. We need a comprehensive overhaul of our industrial policy for industries to thrive and the economy to grow. Regulations must be relaxed, foreign investments encouraged, and SA industries bolstered.

From the West to the East, from the US to China, governments support and favour domestic industries. South Africans deserve the same treatment; we deserve a government that puts our country first.

• Beesley an ActionSA MP, and Scribante the City of Tshwane divisional head of economic policy.