In the January 2021 issue of Metalworking News I wrote of the possible closure of Stalcor, once one of the top three Tier 1 distributors of stainless steel and aluminium products in South Africa. Possible is the wrong word to use because as I wrote: ‘With no staff and no product to sell there can only be one conclusion.’
The worry is that could this be the start of others to come? In this issue’s Viewpoint article by Ludovico Sanges, the MD of Duferco Steel Processing, he states that the local steel industry remains on the brink of implosion and asks why government is not helping? He continues: “The local steel industry thus finds itself with only one supplier of raw product that cannot meet demand, and re-rollers are unable to access imported raw product at competitive prices. And if Duferco and other re-rollers go to the wall, as seems possible, the downstream steel industry will continue to face shortages and will be entirely at the mercy of one re-roller.”
That re-roller is of course ArcelorMittal South Africa (Amsa) – a company that seems to enjoy plenty of government favours.
“Without competition in the re-roller sector of the steel industry, the whole steel value chain will be compromised and prevented from producing product at the best possible price. The South African steel industry is only able to sell in South Africa without any possibility or opportunity to export due to high prices applied by the primary steel manufacturer. As such the downstream industry cannot even think to expand operations or exports. On the contrary, there are strong likelihoods of total closures or relocations of local manufacturing business to neighbouring countries which have a more favourable framework. Because steel is so central to any economy, the knock-on effects on plans for economic revival will be significant.”
“Government has shown that it can play a hugely positive role in nurturing the automotive industry as it has done with the sugar sector – why is it not taking the same proactive approach to the steel industry on which multiple industries rely?”
However, there will always be conflicting views and I was sent this copy of an email in response to the Stalcor article: “I haven’t joined those cheering this week’s (beginning February 2021) news that Ford Motor Company will invest $1bn into its Gauteng factory. The imbongis are delighted that there’s a multinational prepared to inject big bucks in fixed assets. But, in reality, it’s SA citizens who’re footing the bill. The country’s convoluted Motor Industry Development Programme, inherited from the Apartheid government and enhanced by the ANC, massively subsidises and protects the pricing power of motor manufacturers. The effect is to escalate the cost of local cars and trucks by around 30%. If you’re dubious, take a look at prices of equivalent (fully imported) vehicles in Botswana or Mozambique. Surely there’s someone in Pretoria capable of joining these dots?”
Well-known editor-at-large and columnist Peter Bruce recently asked international metals trader and Hulamin shareholder Volke Shütter why would trade and industry minister Ebrahim Patel slip through a huge 15% import duty on aluminium sheet products in the very last government gazette of 2020? As a result I was prompted to publish an article in the last issue of Castings SA: Are South African industrial trade policies being done by stealth? Why are they happening behind closed doors? (castingssa.com/are-south-african-industrial-trade-policies-being-done-by-stealth-why-are-they-happening-behind-closed-doors/).
Bruce continues to write inciteful articles and questions why government is protecting bloated, badly run companies that don’t make a vital contribution to our economy. “Like SAA. We do not need to protect Amsa. It is part of the biggest steel company in the world,” he continued.
There are also the musings of NEASAs (National Employers’ Association of South Africa) Chief Executive Gerhard Papenfus who will have a go at Amsa and the government at every chance he gets.
And quite rightly so because if so many are bleating then it does become a worry.