Skills crisis compounds steel sector’s ills.

SKILLS CRISIS COMPOUNDS STEEL SECTOR’S ILLS

First Published in BusinessDay on 29 May 2022

by Michael Avery

If success means going from failure to failure without a loss of enthusiasm, I guess you can call SA’s industrial policy successful.

After writing about the obvious problems with the steel master plan last week, a wandering albatross dropped off a little parcel — not the excremental kind, but one could have been forgiven for thinking it when I opened it such was the stench of this story of skills decay. 

Ricardo Hausmann is one of the world’s leading experts on what drives economic growth, especially in developing countries. And he’s got a soft spot for SA. The founder and director of Harvard’s Growth Lab often makes the point about human capital — know-how, actually being able to execute — as the key ingredient of that not-so-secret sauce that spices up growth.

We just don’t have sufficiently deep pools of people who know how to do the things that make modern industrial economies tick. My albatross has been encountering a problem trying to secure skilled artisans from overseas.

Per the critical skills list, any manufacturer should be able to apply for work permits for skilled artisans from overseas. But after flogging a dead home affairs horse for two years my albatross gave up all hope.

Take the story, too, of Unica Iron & Steel. The MD imported a plant from India at a cost of R500m. Unica hosted President Cyril Ramaphosa and trade, industry & competition (& master plans) minister Ebrahim Patel with the ribbon still on the floor. Yet for the past two years Unica has been trying to get permits for five expats to come to train local staff, and has spent R2m in the process. It, too, has now given up.

To apply for a permit the applicant needs to send their qualification certificates to the hapless SA Qualifications Agency (Saqa), which despite committing to a six-week turnaround time on its website took six months to come back to the first person Unica applied for — a qualified mechanical engineer who has worked all around the world — and rejected his qualification certificate. No appeal process. That’s it, sorry. Only the applicant can contact Saqa, and only via email. It’s a black hole. And home affairs can’t even look at a work permit application without a Saqa certificate. Nice and tidy. Can’t be home affairs’ fault.  

If you ask around, even in educational institutions like universities, this is a huge problem. Lecturers who have been working here for 10 years are not getting permits renewed. We are losing higher education skills at an alarming rate.

As it stands, there is only one postgraduate steel course being taught in SA, at Stellenbosch University. It is taught by Amanuel Gebremeskel, who happens to be technical director of the Southern African Institute of Steel Construction (SAISC). As far as I know, this is done privately by him and not through the institute. If Amanuel decides to call it a day, what will our steel industry look like in a few years’ time when we are not attracting internationally qualified engineers to work here?

The purpose of institutions like the SAISC is technical education and excellence. When a roof at a Massmart building collapses due to inferior steel grades being produced by government-funded mini mills (which happened last year but during construction, so it never made the headlines, I’m told), who is called? The SAISC. This is a truly scary situation. For many manufacturers it is becoming a serious binding constraint on growth.

“We simply cannot find good artisans any more and the good ones are all being poached by countries like Canada and New Zealand,” laments my albatross. “And then add onto it the risk that the steel we are buying (if we can eventually find it) needs to be scrutinised for quality defects. Tell me again why I’m in the steel industry!”

Nampak rights issue

Nampak couldn’t package its decent operational results as anything but a mixed bag after more than doubling its interim headline earnings but seeing net debt, which had been steadily decreasing, rising more than R300m due to higher working capital requirements. This has raised fresh speculation about whether Africa’s largest packaging company can service R1bn in debt due next month.

Cash flow from operations post net working capital investment of R24m didn’t even cover already restrained capex. A rights issue is squarely back on the table. When I spoke to CEO Erik Smuts about the likelihood of a capital raise he remained cagey but stressed that working with 14 different creditors and going through 14 different credit committees is severely hampering the group’s flexibility to react to a volatile and deeply uncertain environment, with rising commodity costs and fears about global and local growth and inflation.

So, a rights issue seems unavoidable.

Michael Avery is a financial journalist and broadcaster, produces BDTV’s Business Watch.

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