SA steel industry primary versus downstream

SA steel industry primary versus downstream

Below is a testimony from one of our members

Dear Gerhard

I write to you once again with tears in my eyes. It is now more than 5 years since our government implemented duties to protect the primary steel industry, without considering the impact this would have on the downstream users of primary steel.

The short-sightedness of these decisions is evidence of the government’s lack of understanding of both the supply chain and the devastating impact on jobs and the economy that decisions of this nature have.

To draw a real-life comparison, the chicken industry was protected very successfully. This is the argument that our esteemed Ministers recite as examples of the success of protectionism, however, a chicken is the end product that one produces from the raw material inputs of grains, water, energy, and labour. These raw input materials produce chickens and thus making comparisons in the primary steel industry with that of the success of protecting the chicken industry is simply comparing apples and pears. The chicken industry is the manufactured end product, whereas the primary steel industry is the raw material for the manufactured end product. In other words, primary steel is in fact the grain in this analogy.  

Today we sit with steel prices more than double what they were 5 years ago. AMSA has still not invested the monies they promised to, nor have they paid their competition board fines. They have retrenched staff, cut production, and are making a huge profit. Their share price has gone from 29 cents a share to 429 cents per share. In short, they are making massive profits on the back of retrenchments, lower volumes, and lack of investment, whilst the downstream simply cannot compete with the rest of the world in the beneficiation of the steel, even losing market share to the SADEC region and 100s of thousands of jobs.

Finally, even when we as manufacturers of finished products approach AMSA to buy steel from them, they have lead times much longer than imports, they do not commit to pricing more than one month in advance and thus leave us totally exposed in terms of our costs. They will not produce any quality that is not considered a standard quality for them without a massive premium for that. They will not produce any non-standard gauges, all because they only want to have the most efficient runs on their lines, thereby increasing their bottom line with no consideration for the downstream’s needs in terms of the competition of supply of the finished products.

Whilst I am not a communist and do not believe in communist economic policies, I am dumbfounded that the Minister of Trade and Industry and his advisors are acting in complete contravention of their communist policies, which surely must be to create as many jobs as possible. Yet, their actions are doing the exact opposite of that - not to mention the deindustrialisation of what was the most industrialised country in Africa a mere 25 years ago.

The definition of insanity is doing the same thing over and over again and expecting a different result.