The clock is ticking as steelmaker ArcelorMittal SA (Amsa) faces implosion without a credible plan in sight to save it and the thousands of jobs it sustains.
For months government has been mulling over a plan to save the group after years of pumping in billions of rand of taxpayer funds. Through the Industrial Development Corporation (IDC), government is now the second largest shareholder after the Mittal family.
Afrikaner nationalists had set up Iscor to drive SA’s industrialisation during the apartheid era, but towards the dawn of all-race democracy it was privatised and the new ANC government later sold it to Lakshmi Mittal. This after it had hived off its mining interests, which are now Kumba.
The ANC’s dominant faction, led by President Cyril Ramaphosa, is reluctant to renationalise Amsa, which has been smacked by cheap Chinese imports, unreliable energy supply and a global oversupply of steel. Amsa has been shrinking and is now a fraction of what it used to be. Shedding jobs, closing units and bailouts have been its halfhearted response to the crisis.
Plans on the table are not ambitious enough. They are as uninspiring as previous piecemeal ones. They include another bailout, and finding a private sector buyer. The latter will be as hard to pull off as squeezing toothpaste back into the tube. In its current form, Amsa is simply unappealing.
The IDC is not structured to run things. It passively invests and acts as a premier development financier through the proceeds of its investments. Government’s plan also lacks credibility. This is likely to include warehousing Amsa while recruiting a buyer, with BEE top of mind.
Trade unions such as the SA Federation of Trade Unions are calling for Amsa to be renationalised. This could work, provided it is supported by big policy changes. An aggressive public sector-led infrastructure investment would give it a fighting chance.
Talk of turning SA into a construction site has come to nought. Most of the cranes in our big cities are working on private sector-driven construction projects.
Iscor succeeded because of ideology and policy to support it. The apartheid laager economy was designed to ensure SA was self-sufficient from the world, which had isolated the state.
A more ambitious, long-term and forward-looking plan should not seek to save Amsa and the few thousand jobs it directly sustains. Rather, government should use Amsa to seed up a new pan-African steel company to drive industrialisation, not only in SA but across the African continent.
Despite the failure of privatisation government should unashamedly seek a wholly owned state steel company. Other African governments should be invited to take equity in this company.
Iscor’s growth was supported by protectionism. This is unlikely to return, and shouldn’t return. However, the country’s antidumping authorities should be vigilant in enforcing the laws.
Government, seemingly ashamed of playing any meaningful role in the economy, should stop being apologetic for a handful of corrupt individuals who have looted state-owned enterprises.
Even in today’s green economy, steel will continue to drive industrialisation. As a start, this new steel company should produce mainly for the public sector infrastructure programme.
Despite SA’s steel sector being in the doldrums, the country is still blessed with skills. Most of the former Iscor executives are still around. A case in point is former Iscor CEO Louis van Niekerk, and many others.
After leaving Iscor Van Niekerk spent a few years as chief operations officer at Transnet, the state-owned freight logistics company that is one of the anchors dragging Amsa down. He returned to the steel industry, his first passion, after leaving Transnet, and is still an energetic executive.
Yet, it’s hard to think that in its current form as a steel-only company Amsa can have much economic impact. Government should seriously consider merging what remains of Amsa with Kumba as part of a grand plan to revive SA’s steel industry.
Government should be thinking about how to create thousands of jobs, not only saving the Amsa jobs and those in associated industries. Pragmatism must replace ideology.
• Dludlu, a former editor of Sowetan, is CEO of the Small Business Institute.
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