The Industrial Development Corporation’s (IDC) R1.2bn support package for ArcelorMittal SA (Amsa), aimed at keeping the company’s long steel operations in Newcastle and Vereeniging alive, is not a cause for celebration. It is a hard, pragmatic step to prevent economic and social devastation.
With thousands of jobs on the line and entire local economies at risk, this intervention was largely unavoidable. However, it must be understood for what it is: a temporary lifeline and not a solution. It demonstrates the urgent need for deeper structural reforms in the broader steel industry.
The situation at Amsa is symptomatic of a wider industrial malaise. The company’s planned shutdown of its long steel operations, responsible for products essential to construction, infrastructure and mining, exposed how fragile our industrial base has become under the weight of high energy prices, collapsing infrastructure, flawed trade policy and uncompetitive market structures.
This is not an isolated case. The slow collapse of SA’s once-thriving textile and clothing industry, despite years of import tariffs and government incentives, demonstrates the futility of protectionism without reform. Similarly, segments of the poultry industry and state-backed manufacturing initiatives have struggled or failed altogether, weighed down by inefficiencies and policy incoherence. These failures highlight the urgent need for a new industrial model based on competition, innovation and enabling infrastructure rather than protection and subsidy.
What makes Amsa’s case particularly troubling is that even as it has scaled down its workforce — most notably with the closure of the Saldanha plant — and reduced annual steel output, the company has still registered profits in certain periods. Yet these profits have not translated into meaningful reinvestment. Amsa has consistently failed to upgrade its plants and equipment, eroding its competitiveness and leaving it poorly positioned to adapt to global shifts in steel production technologies and market demands.
Instead of modernising or diversifying, Amsa has relied on its dominant position and government protection to stay afloat, at the expense of innovation and the wider steel value chain. In the absence of meaningful reform the government will continue to throw taxpayer money at failing firms while the downstream value chain suffers. SA’s steel industry cannot be built on bailouts. It must be rebuilt on competition, decentralisation and a functional economic ecosystem.
While the DA recognises that short-term action was needed to avoid mass retrenchments and social dislocation, it is also clear that Amsa’s problems are not simply cyclical. They reflect deep structural weaknesses that require a bold shift in industrial policy, one trade, industry & competition minister Parks Tau has so far avoided.
Amsa operates in a market where it enjoys dominant pricing power, with limited pressure to reform or compete. Downstream manufacturers, from fabricators to vehicle parts suppliers, have long complained of excessive pricing, erratic supply and inadequate support — such as Amsa’s failure to provide reliable delivery schedules, limited technical assistance, inflexible supply agreements and poor communication about lead times and production delays. These shortcomings make it difficult for downstream firms to plan production, price competitively or meet export commitments, ultimately undermining their viability in both local and global markets.
As outlined in the DA’s economic policy, SA’s growth must come from creating open, competitive markets, not entrenching monopolies or protecting incumbents. That is why any future restructuring of Amsa’s long steel assets must be conducted through a transparent, competitive process. All credible bids must be assessed on merit, with full public disclosure and independent oversight. The government must avoid the temptation to handpick winners or shield politically preferred buyers.
A new industrial model should emerge, one where new entrants, including smaller producers using electric arc furnaces, are able to operate without artificial barriers. These barriers include excessive red tape for obtaining operating licences, restrictive environmental compliance processes that favour established players, limited access to affordable scrap metal due to the flawed price preference system (PPS), and preferential treatment in procurement and infrastructure access for dominant incumbents such as Amsa. Such barriers protect large, inefficient firms while preventing more agile, innovative producers from entering the market and driving competition. Removing such barriers will not only reduce prices and improve supply security, but also stimulate jobs and investment into the sector.
Rather than becoming a player in the steel industry, the state should focus on fixing the basics that allow the private sector to thrive. That includes:
- Creating a competitive energy market to ensure stable and affordable electricity supply by allowing for private sector involvement in generation, transmission and distribution.
- Concessioning out rail corridors to the private partners so that logistical bottlenecks no longer erode competitiveness.
- Scrapping the PPS, which creates an artificial price on scrap metal, distorts the market and reduces competitiveness.
- Simplifying and standardising the permitting and licensing process for new steel producers, particularly for those using electric arc furnaces, to reduce costly delays. This includes fast-tracking environmental approvals where appropriate, providing regulatory clarity on scrap metal exports and imports, and removing conflicting municipal and national compliance requirements that create uncertainty for investors.
The steel industry does not need handouts, it needs predictability, fairness and infrastructure that works. A thriving steel sector must support all its players, particularly the downstream segment where most jobs and value addition occur. These firms rely on consistent supply, competitive prices and supportive policy to remain viable. Bailouts for upstream producers that distort prices or restrict supply ultimately hurt the wider economy.
If the government is serious about saving jobs and rebuilding the industry it must shift its support downstream, where the multiplier effects are greater and the opportunities broader. Downstream industries such as metal fabrication, automotive components and construction materials are more labour-intensive, create more jobs per unit of output, and are better positioned to drive exports and industrial diversification. Supporting these sectors stimulates broader economic activity, strengthens supply chains and delivers greater returns in employment and GDP growth than propping up a single upstream producer. It must also support reskilling and enterprise development in communities such as Newcastle and Vereeniging to ensure long-term employment resilience.
This R1.2bn intervention must be the last of its kind, not because jobs do not matter but because there is a better alternative. That alternative is building an enabling environment where industrial growth is not dependent on government cheques but on market confidence and efficient infrastructure.
SA industry stands at a crossroad — repeat the mistakes of the past or chart a new course rooted in open markets, decentralised industrial growth and a capable state that enables, rather than intervenes. The DA stands ready to lead that transition, not in defence of any one firm but in defence of the thousands of workers, entrepreneurs and manufacturers whose futures depend on a competitive and growing steel sector.
• Mdluli, an MP, is DA deputy spokesperson on trade, industry & competition.
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