AMSA’s Saldanha Steelworks: Government’s solution even worse

AMSA’s SALDANHA STEELWORKS:

GOVERNMENT’s SOLUTION EVEN WORSE

by Gerhard Papenfus

Government wants to keep AMSA’s Saldanha Steel plant open – at all costs.

Over and above the 20 percent duties preventing the steel downstream from importing cheaper and better quality steel – which serves no purpose other than rapidly eroding South Africa’s downstream manufacturing capacity and delaying AMSA’s demise – the Department of Trade, Industry and Competition (DTIC) is taking its efforts to save an unsustainable enterprise to an unprecedented level.

The DTIC has announced that it has engaged with AMSA’s management on support that could reduce costs in respect of, among others, electricity, water and rail tariffs. According to the DTIC this will have the effect of “providing considerable cost savings” to Saldanha Steel.

There is, however, no cost savings involved. Someone is paying. The DTIC solution is merely a subsidy. In the case of protectionist duties, the steel downstream is bearing the brunt. Cheaper electricity, water and transport, amounts to a ‘dubble-whammy’ for the steel downstream. For the taxpayer, a subsidy simply amounts to supporting another Eskom, SAA (and a multitude other failing institutions) – just another attempt at keeping a deceased institution on life support.

When will we learn that, unless an institution can sustain itself and prove its worth, it is doomed – not if, but when. The help government is offering just delays the inevitable – in the process draining the fiscus.

AMSA itself has declared that Saldanha Steel cannot be run profitably and that the possibility of an outside buyer, coming to its rescue, is remote. Surprisingly, however, there is talk about just such a buyer which raises the concern that the plant will be offered with the advantage of protectionist duties, cheaper power, rail and water. If this is the case, South Africa would be locked in a deal that will have disastrous consequences for the steel industry and South Africans in general.

AMSA, instead of being a strategic asset, is a strategic liability. Unless a prospective buyer can prove that it will contribute to South Africa without protectionist duties and subsidies, the same scenario will play out.

We can only hope that good sense will prevail going forward.

Gerhard Papenfus is the Chief Executive of the National Employers’ Association of South Africa (NEASA).

Kind Regards
NEASA Media Department
marietha@neasa.co.za