With its eyes wide shut, the ANC government has launched SA down a path of industrial peril from which it could take decades to escape, if it ever can.
Spooked by the decision by Arcelor-Mittal SA (Amsa), the country’s only integrated steelmaker, to close down its long products (bars, rods and pipes) division at Newcastle, and the alarm raised by local car manufacturers that would quickly have to source imports of the Amsa products they use, the department of trade, industry & competition has gazetted a sweeping tariff review of almost all imported steel products.
The review of more than 600 product tariffs (plus the possible introduction of import permits, which raises the prospect of new levels of industrial policy control) threatens steeply higher costs for almost 10,000 steel importers, implying higher prices across the entire steel value chain.
‘Companies will fail’
“There is a non-trivial risk of going out of business,” warns Donald MacKay, CEO of XA Global Trade Advisors. “Companies will fail.”
Amsa, part of the huge multinational Mittal steel group, announced late last year that it would close Newcastle. It had done so a year earlier, but was persuaded to hold off by the government, which was worried about the effect closure would have on its 2024 election prospects. Talks since then have come to nothing. Talks since the second closure announcement have come to nothing as well, or they had until President Cyril Ramaphosa reportedly met ArcelorMittal founder Lakshmi Mittal on the sidelines of the Davos conference in Switzerland.
Since then the government has stretched itself to the maximum to keep Newcastle open. It is offering to pay for a year the salaries of the 3,500 steelworkers who would otherwise lose their jobs; it is investigating Amsa’s complaints about state subsidies for new local competitors created by the state through the Industrial Development Corporation that have begun to eat into Newcastle’s local market; and it says it is looking for buyers to take over the running of the long products business, while begging Amsa not to close it before they do.
Closing a steel plant is a big deal. It is a hot, molten process. Restarting a blast furnace, the core of all integrated steelmaking, is slow and expensive. Worse for the government, or perhaps particularly the ANC, is that the world is drowning in steel and US President Donald Trump’s promised tariffs portend market chaos that will make the present oversupply seem like child’s play.
Who would voluntarily spend money investing in the ageing Newcastle plant when often-superior product is available on the high seas at a fraction of the local prices is anyone’s guess. Still, it should surprise no-one who tracks ANC industrial policy that its answer to the prospect of job losses has been to double down on the strategies that crippled steel in the first place.
The government might get to save some jobs in Big Steel here, but it won’t create any. The steel jobs with a future are downstream, in those 10,000 importers.
Fundamentally, the disease is state intervention. The ANC has tried to micromanage the steel industry and is incapable of leaving what it sees as big and core industries alone, and allowing fit companies to survive and the weak to fail. The results are not pretty, but the gut politics of the ANC rules.
The curious thing is that as much as SA’s black nationalist government despises (with good reason) the white nationalists it replaced, it holds an almost reverential admiration for old white industrial policy. Governments before and during apartheid ran siege economies, making SA self-sufficient in steel, aluminium and energy.
The ANC still reaches for these glory days, forgetting that no white industrial success would have been possible without cheap black labour and a fundamental inhumanity towards black people.
As a result, industrial policy is often incoherent, trying to shoehorn the labour intensive mines, railways and building of the past into manufacturing driven today by automation and, increasingly, AI. All politicians want to create jobs, but we are trying to sustain an industrial model the UK escaped in the 1970s. We’re 50 years behind, chasing ghosts.
The government might get to save some jobs in Big Steel here, but it won’t create any. The steel jobs with a future are downstream, in those 10,000 importers. Many hundreds of them will be small fabricators, cutting and shaping steel into products they can often export. But they don’t create unionised jobs and the ANC isn’t interested.
The Indian steel industry lives off its domestic fabricators, big and small, but it has the luxury of a huge internal market. Once we have made local steel impossibly expensive any hopes of that happening at scale in SA will be lost. Clearly not all import tariffs are a bad thing. Neither are cheap imports. But while we de-industrialise the ANC is lost in transformation.
On March 19 Parks’ department detailed how earnestly it was wrestling with the Newcastle problem while on the same day formally announcing that it was going to “establish a R100bn aggregated fund to support the ever-growing funding needs for businesses owned and managed by black entrepreneurs”.
In other words it has no operating industrial vision other than money to whoever in its constituency needs it.
There was, for instance, probably no big constituency in the local R2.5bn roasted groundnut (think peanut butter) industry, which applied to the department and its trade regulator for protective import tariffs in February 2020. Not a good time, admittedly, but the regulator, Itac, took so long to look into the case made by the SA Groundnuts Forum that the local industry gave up, and 50 months later shut up shop.
That could cost 3,000 jobs, just shy of the 3,500 at Amsa Newcastle, but somehow just not as important.
• Bruce is a former editor of Business Day and the Financial Mail.
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