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Proposed steel master plan or just another AMSA protectionist idea?

Proposed steel master plan or just another AMSA protectionist idea?

by Gerhard Papenfus

During SONA 2020 President 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 that 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 published in Engineering News, Mr Charles Dednam, an ex-ArcelorMittal SA (AMSA) employee and the General Secretary of the South African Iron and Steel Institute (SAISI - also AMSA sponsored) expressed the necessity of trade measures (i.e. import duties on raw material to protect AMSA). In addition to this, the Department of Trade, Industry and Competition’s (DTIC) proposed Master Plan, drafted by Mr Dednam, is (not surprisingly in light of his close connections to AMSA), riddled with support for import duties to protect AMSA. 

In his article, Mr Dednam could not ignore the indisputable fact that the Steel Industry’s main challenge is its uncompetitiveness. He consequently concludes that competitiveness constitutes the Master Plan’s top priority. However, he also emphasizes the importance of the continuation of import duties (protecting the steel monopoly AMSA), 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. Mr 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 AMSA.

Over the last decade, the employment figures of the Steel Industry have dropped drastically. Since 2015, when the duties were imposed, close to a thousand companies were liquidated. In addition to this, over 300 companies have been put in business rescue. The protection of AMSA is not solely responsible for this, although it is a major contributor to the Industry’s woes.

Government’s commitment to protect AMSA, regardless of the devastating impact it has on the downstream, remains a mystery. These duties are only delaying the inevitable, as far as AMSA is concerned, while the downstream is severely prejudiced. 

If these duties were never introduced:

  • AMSA 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; and 
  • many of those companies that were liquidated, would still have contributed to the preservation of the South African 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 steel monopoly AMSA; and
  • the current labour law dispensation which facilitates the ONCE powerful Seifsa and Numsa’s impact on particularly SMME’s in the Steel Industry, and their wage agreement, which provides for an outrageous minimum wage (currently R11 500 ctc) against which the Industry constantly needs to defend itself.

In response to the proposed Steel Master Plan, NEASA’s approach is simply this:

scrap these Industry-, business- and job destroying duties.