Calls for an urgent overhaul of SA’s industrial policy are mounting as the country’s steel sector sinks deeper into the mire with an estimated 100,000 jobs on the line.
Addressing the portfolio committee on trade, industry and competition on Wednesday, the Steel & Engineering Industries Federation of Southern Africa (Seifsa) criticised the rollout of the steel sector’s flagship regulation.
The steel and metal fabrication master plan, launched in 2021, aims to breathe new life into the steel sector as part of the country’s broader re-industrialisation agenda, but Seifsa said that its execution has lacked focus.
“Instead of clarity and action, we have seen diffusion and inaction,” Seifsa president and chair Elias Monage said. “With over 20 workstreams and 73 deliverables, the steel master plan lacked focus. As progress stalled, industry leadership began to withdraw, disillusioned by the government’s inability to deliver on commitments”.
The industry’s precarious position is evidenced by ArcelorMittal SA’s (Amsa’s) announcement earlier this year that it would wind down its longs business, placing about 3,500 jobs at risk.
Representatives of downstream steel industries have estimated that job losses stemming from the closure could ultimately exceed 100,000 because Amsa is the only local producer that can supply its longs products at the required quality and quantity.
As Sub-Saharan Africa’s largest steelmaker, Amsa’s financial woes reflect the broader decline of SA’s steel sector. The local steel industry has lost 25,000 jobs since 2009, while production has plunged 40% below a 2006 peak, according to independent economic research consultancy Econometrix.
While global steel consumption has trended steadily higher, SA’s per capita steel consumption has dropped 37% since 2013, pointing to structural problems in the local industry.
“If we are to reverse this trajectory, we have no choice but to fundamentally rethink SA’s industrial policy. Business-as-usual will not suffice. Government must acknowledge that past interventions, however well-intentioned, have not delivered the intended impact,” Monage said.
“This moment demands a bold shift — from fragmented policies and siloed departments to a unified national compact anchored in public-private collaboration.”
The call for a reworked industrial action plan was echoed by the SA Iron & Steel Institute (Saisa), which warned that steel imports were at “unacceptable levels” given stagnant domestic growth.
“The need for action is urgent. More of the same is likely to produce the same result, with negative consequences for labour, revenue collection and the long-term sustainability of the steel and engineering sector,” Saisa said.
Another critic of the steel and metal fabrication master plan is the Metal Recyclers Association of SA, which accused the government of deliberately excluding scrap metal producers.
“Requests were made to join but eventually the conditions given for joining were so onerous it’s not hard to see that as an attempt to deliberately keep this sector out of participation,” said Donald MacKay, CEO of XA Global Trade Advisors.
The steel master plan covers the scrap sector but scrap recyclers lack representation on the plan’s oversight committee, which has resulted in policies that “directly harm the recycling and scrap generating sector”.
Of particular concern is the double burden imposed on scrap metal exporters by the price preference system and export duties, MacKay said.
The price preference system provides support to foundries and mini mills which convert scrap steel into steel products by prohibiting the export of scrap metal unless it has first been offered to these domestic consumers at a discount to the international price at the time of sale.
In 2021, the International Trade Administration Commission of SA (Itac) recommended that price preference system be discontinued and replaced with an export tax on scrap steel.
Instead, export duties were introduced on top of the price preference system, putting scrap exporters at a significant disadvantage while scrap consumers were sheltered from duties.
In the first four months of this year, Itac approved almost 400,000 tonnes of ferrous billets and ingots for export.
“This is not industrialisation. All you’re doing is creating an arbitrage to buy scrap cheaply, melt it into a block and sell it to foreign consumers at a discount,” MacKay said.
The International Steel Fabricators of Southern Africa agreed with the “general industry consensus” that the steel master plan has failed in its main objectives, and urged the department of trade, industry & competition to accelerate its recently launched review of tariffs.
In April, the government embarked on its most extensive review of steel tariffs in more than 20 years as officials explored a more protectionist policy framework to shelter SA’s steel industry from cheap imports.
The review, which Itac told Business Day was expected to be concluded by the end of July, could also lead to the introduction of import controls for certain products and the possible creation of rebate provisions for the duty-free importation of input products used in manufacturing activities.
With Kabelo Khumalo
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.