Steel Industry: Amsa vs the downstream

STEEL INDUSTRY
AMSA vs the DOWNSTREAM

Letter from a very concerned steel entrepreneur

Dear Gerhard

As was already admitted by AMSAs CEO, they made a mistake when getting duties on the primary industry without protecting the down stream. Today South Africa faces a massive threat – which has already begun – by its more investor friendly neighbours. Mauritius has announced in their new budget that, not only do they have a zero rated tax regime for exports produced in their free zone, but now all manufactured goods exported from Mauritius will attract only 3 percent tax.

What this means is that, whilst Mauritius already has a maximum tax on personal and companies at 15 percent, the new budget will drop the tax on profits generated from exports to 3 percent. They have no duties on steel imports and they have a free zone for manufacturing; their port charges are half those of South Africa, zero company tax, zero dividend tax and no duties for products coming into South Africa or SADAC or COMESA. How long before all the island is manufacturing all the down stream products that we manufacture here in South Africa?

We have already seen Chinese and Taiwanese companies setting up (in Mauritius) and manufacturing and exporting product to South Africa in the last year and the volumes are already picking up. They are importing labour and by the time we get all the down stream manufacturers protected in South Africa, even if we could, there will be massive job losses, insolvencies and major unrest in the country .

Mistakes can be made but one can not simply say sorry when effectively you are collapsing your own economy because you are only interested in dividing the pie into smaller pieces and not enlarging the pie bigger. Listening to a multinational company with a particular agenda and with government not having the forsight or technical knowledge to be able to see what will ultimately transpire, is tantamount to economic suicide.

If government wants to really grow jobs in what is already an industrialised economy in the process of collapsing, the only way to do so is to drop taxes, incentivise investment and, unfortunately, allow market forces to determine labour costs. Any other way is destructive and unsustainable.

Once a skilled work force enters the economy, it will grow, earnings per capita will increase and over two or three generations of continued growth and reinvestment the entire society will benefit. And, yes, some people might get rich and some might be exploited but, for the most part, over time, the majority will become middle class; this is because the demand will outstrip the supply just like it is happening in Mauritius right now.

AMSA in fact backs this now but the damage is done. Government however is to blame for not being able to see past their immediate gratification to the damage it has done and will continue to do in the future .

Something has to be done now!

Regards

Steel Entrepreneur

The only job a government can create is a government job – unknown