SA’s favourite private sector bailout beneficiary is back for an encore. ArcelorMittal SA’s longs division has wrung R1.6bn from the IDC, coerced a 52% tariff on imported coil and scored a R417m wage subsidy.
Still, it teeters on the brink of shutdown come September. It’s like patching a sinking ship with chewing gum and hoping the ocean dries up. It’s starting to look less like industrial policy and more like a never-ending drama of half measures.
The script is familiar. First, the state dispatches its cheque book to avert widespread job losses — some 3,000 livelihoods hang in the balance. Next comes tariff relief, ostensibly to shield domestic producers from unfair competition. Finally, corporate management issues a dire warning: without fresh remedies, the mill must wind down operations. For all the drama, the underlying ailments remain unaddressed.
At the heart of Amsa’s malaise lies structural rot. SA’s electricity costs are among the highest in the world, turning steelmaking — a power-intensive business — into a money burner. Transnet has turned railways into a labyrinth of delays and penalty rates. Meanwhile, global overcapacity and cheap imports continue to flood local markets, despite punitive duties.
Last month’s 52% tariff on corrosion-resistant steel coil, imposed by the International Trade Administration Commission, felt more like window dressing than a cure. Tariffs can buy breathing room, to be sure, but they do little to unclog rail lines. Nor do they address the lingering suspicion that state support — be it cash or customs protection — has become more an end in itself than a bridge to reform.
Eskom’s woes provide a sobering lesson. Decades of underinvestment, mismanagement and moral hazard have saddled the SA industry with erratic supply and punishing rates. Compounded by Transnet’s market dominance and alleged price gouging, manufacturing costs have ballooned. Amsa’s complaint to the Competition Tribunal, accusing Transnet of exploiting its monopoly, speaks volumes about the urgency of unshackling supply chain bottlenecks.
Still, litigation alone will not reverse decades of infrastructural neglect. True industrial policy demands more than reactive firefighting. A more coherent industrial strategy is overdue — one that weaves together energy reform, transport liberalisation and targeted fiscal incentives. Offering state loans without demanding efficient gains or capital expenditure upgrades encourages complacency rather than competitiveness. Likewise, waving tariffs at imports only invites retaliatory measures and stifles downstream industries reliant on affordable steel.
Policymakers would do better to treat the disease, not the symptoms. First, Eskom’s break-up must accelerate, with transparent, cost-reflective tariffs for large-scale users. Second, the opening of rail to the private sector must be stepped up, with freight corridors reconfigured to serve industrial hubs.
Such measures would carry real teeth. They would shift the focus from perpetual bailouts to productive, from protectionism to partnership and from state patronage to market discipline. They would signal to investors that SA is serious about tackling its economic headwinds, not merely papering over them with tranches of cash.
The stakes extend beyond one corporate balance sheet. Amsa’s longs division feeds construction, manufacturing and agricultural producers across the region. Its collapse would choke the arteries of regional value chains. Conversely, a revitalised steel sector could anchor a broader renewal of SA industry.
For now, the question is whether trade, industry & competition minister Parks Tau will subsidise a ghost industry or summon the courage to perform the necessary industrial surgery. Otherwise, the drama will end not with applause, but a final, ungraceful collapse.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.