A child could have predicted that ArcelorMittal (Amsa), the country’s only integrated steelmaker, would finally decide to close its long-steel works at Newcastle and dismantle 3,500 jobs and half of its remaining steelmaking capacity in the country.
The government has already pumped close to R2bn into Newcastle, including full wage support, for nought. The state waffles on about looking for a buyer, but that is a fantasy. It made the same commitment when Amsa closed down its modern steelmaking plant at Saldanha in 2020.
The facts are stark — in 2023 crude steel production in SA was down 32% on 2014, and there is such overproduction in the world now that producers everywhere are under stress. There were no takers for Saldanha and there’ll be none for Newcastle.
Britain’s Labour government is supporting two core, but crippled, steelmakers after their owners literally walked away from their businesses. The amount of steel surplus to global requirements is believed to be about 70-million tonnes, roughly equal to the entire annual output of the world’s fourth biggest producer, the US.
An ANC government here, desperate to save ANC-supporting unionised jobs and give some heft to its monotonous promises to re-industrialise the country, has simply failed to appreciate the scale of the problem. Local demand is low because there is no construction activity, which is the result of poor investment levels because the government simply cannot create the policies to attract it.
There are outliers, but the state’s insistence that foreign investors pay BEE premiums and then face high levels of crime and corruption, fanciful local content rules and uncompetitive labour costs, has a price.
To grow the economy fast enough to reverse record unemployment levels SA needs fixed investments of at least 25% of GDP. When President Cyril Ramaphosa set himself a target of raising R1.2-trillion in investment pledges in his first term, he was targeting less than half of that.
Local steelmakers — Amsa and smaller companies that make steel by melting scrap in electric arc furnaces — blame cheap Chinese imports, but that is only a fraction of the story. Amsa employs about 7,000 people, but there are 10 times more jobs than that in the hundreds of small-scale steel users and fabricators (many of which export) that need cheaper steel to survive.
Instead of finding ways to support them, the government has imposed arduous import tariffs on steel products to protect the steel industry, at the cost of the fabricators and smaller users.
For the ANC and the owners of industrial policy in the department of trade, industry & competition there is no way out of this predicament without a comprehensive revision of policy.
The awful truth is that not only does Newcastle make nothing you cannot buy cheaper on the open seas, but apart from an ill-founded notion that steel is somehow “strategic” there may be no reason to make steel in SA at all, unless you have products or customers you can count on and who count on you.
SA is the 28th biggest steel producer in the world, at about 4.7-million tonnes last year. That will fall sharply now that Newcastle is to close, and puts us among the UK, Finland, Slovakia and the United Arab Emirates, which in terms of overall steelmaking capacity, we lead.
That is no disgrace, but the complete absence of cold economic reality in government is. Industrial policy here is hopelessly lost. To get to the investment levels we require to create the millions of jobs politicians keep promising, we need to make growth — export-led if possible — our single national goal, and remove even the most contested impediments.
It won’t happen with the ANC in the presidency, but that doesn’t change the challenge one iota.
• Bruce is a former editor of Business Day and the Financial Mail.
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