Dear Mr President,
I’m sure you have your hands full, what with delinquent cabinet ministers sounding the starting gun on the ANC’s internal leadership race. Dealing with the first volume of the Zondo commission’s report on state capture is probably on the back burner, at least until all three volumes have been released.
Surely, your singular focus must now be on the economy, with barely two weeks to a crucial state of the nation address in Cape Town’s city hall, while parliament smoulders.
As the destructive waves of the global Covid-19 pandemic over the past two years roll back, revealing the true extent of the damage inflicted on the global and SA economies, from lives lost to businesses destroyed and jobs flattened in its wake, I’m sure your advisers have you well apprised of the gory details.
Mr President, forgive my forthright appraisal of where the country finds itself, and where your presidency sits — atop the horns of a dilemma — but the creek that rhymes with pit (latrine) is flowing faster than ever towards the fiscal cliff, and there are few paddles in sight.
Save for one that came across my desk recently that offers tangible benefits almost immediately in that cheapest form of stimulus — confidence — a medium- and long-term balm to soothe and repair an ailing economy in the form of jobs-rich, industrial growth.
The idea builds on your focus of placing SA in the vanguard of the fight against climate change and global decarbonisation efforts, as well as SA’s recent success at COP26 in Glasgow.
Research conducted for the Deep Decarbonisation Pathways (DDP) project, in collaboration with the National Business Initiative, indicates that SA could develop a local industry around exporting green primary iron (GPI) to the EU and the rest of Sub-Saharan Africa.
Allow me to explain, and declare for full disclosure that one of the researchers is my uncle, Hilton Trollip, who is also one of the contributing authors to the 1998 white paper that warned that load-shedding would likely start in 2007, and was ignored by your predecessor.
The researchers (Trollip, Bryce McCall, Chris Bataille) form part of the DDP teams who build and bring to the public debate realistic decarbonisation pathways to 2050. These are designed to deeply reduce carbon emissions while satisfying socioeconomic objectives.
Steel is essential for the functioning of our society and economy. It is the world’s largest materials industry, generating annual turnover of $1-trillion.
Most primary steel demand will come from the construction of new transport, energy and urban infrastructure, much of which is required to meet the global sustainable development goals. This demand will not be met from recycled steel, so vast quantities of primary iron will be required.
However, the researchers point out that current processes to manufacture primary steel “produce the most emissions of all heavy industry sectors” at between 2 gigatonnes (GT) and 3.6Gt “amounting to 5.6%-10% of global combustion and process CO2 emissions”.
This is where SA has a strong competitive advantage, in the form of abundant renewable energy and hydrogen potential allied to rich iron ore stocks and relatively well-developed infrastructure, much of which has been used in the past to drive the country’s industrialisation.
As you are aware, SA also faces an imminent decline in coal, and the researchers model that 1Mt of GPI could yield similar export earnings to 5-million tonnes of iron ore or 7-million tonnes of coal.
Europe has made concrete commitments to decarbonise its steel sector, and this is where your government has a role to play, Mr President, in helping support the development of a local market in a similar vein to the way policy supported the first steps of the renewable energy industry through the valley of commercialisation death to the cost-competitive player it is today in the energy sector.
The researchers’ model that “near-zero-emissions iron will be in commercial-scale production within 10 years. Prices are expected to be 30%-50% higher than those of conventional steel, but dedicated market arrangements can drive the transition, similar in concept to those used in renewable energy electricity markets in the 2000s and 2010s”.
They reckon the benefit to Europe in its decarbonisation drive would far outweigh any EU job losses, mitigating potential political trade risk.
Trollip says the next steps would entail SA industry associations making specific proposals along the lines of those outlined in the DDP concept document, enriched, and probably substantially modified/extended, using their depth of knowledge and expertise.
The proposals could be canvassed as necessary with relevant government departments.
“In parallel, the substantially complicated technical and political issues involved in how EU lead markets and the international trade regulatory aspects of ‘creating a level playing field on the global steel market’ would need to be further elaborated at a technical level and discussed with the EU.”
Trollip tells me that since the team conceived of this two years ago “it’s evolved from ArcelorMittal questioning the economics and technology maturity, [ArcelorMittal SA] being lukewarm on SA prospects, and then ArcelorMittal announcing last July a plant to begin zero-emissions steel production in Spain in 2025”.
Mr President, if ever you needed a flagship project to breathe fresh life into your desire for a developmental state, here is your opportunity.
• Avery, a financial journalist and broadcaster, produces BDTV’s Business Watch. Contact him at Badger@businesslive.co.za.
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