Steel Industry: This Is Why NEASA Is Not A Signatory To The Steel Master Plan

STEEL INDUSTRY

THIS IS WHY NEASA IS NOT A SIGNATORY TO THE
STEEL MASTER PLAN

by Gerhard Papenfus

NEASA and Seifsa fundamentally differ on almost all issues, including the support of the Steel Master Plan.
Seifsa, the only employer body in the steel industry who signed Ebrahim Patel’s Steel Master Plan, recently called on other employer bodies in the steel industry to actively pursue the implementation of this ‘Plan’.

In this newsletter we will briefly deal with two reasons why NEASA is not a signatory to the Steel Master Plan.

The first reason for NEASA’s refusal to sign the Steel Master Plan, is the fact that this Plan has, as a primary objective, the promotion of ‘localisation’. Although the entire notion of ‘localisation’ sounds patriotic, on face value to be supported by everyone, it is deceptive and contra-productive, causing more harm than good.

The Centre for Development and Enterprise (CDE), an independent policy research and advocacy organisation, is South Africa’s leading development thinktank. Since 1995, the CDE has been consulting widely, gathering evidence, and generating innovative policy recommendations on issues critical to economic growth.

In a recent study, written by two professors from the School of Economics at the University of Cape Town, the CDE warns against localisation and calls it “The siren song of localisation” to the South African economy, referring to a mythical legend in which sailors were lured, causing their ships to be stranded on the rocks.

In forcing someone to buy expensive products, which is the likely result of a ‘localisation’ policy, those manufacturers will not pursue steps to become more competitive to compete with cheaper counterparts. In not being competitive, you transform the business in an export-killer, which is exactly the opposite of what you are trying to achieve. It is generally acknowledged that the steel industry’s only saviour would be to enhance exports, since the local market is very subdued and the probability of an infrastructure roll-out, as promised by Government, is very low.

NEASA’s second reason for not being a signatory of the Steel Master Plan, is the issue of ‘steel import duties’. In the Steel Master Plan, the duties on flat products to protect AMSA, are called “interim measures” and the question arises of how interim a measure is that was implemented in 2015 and to this day has no sunset-clause. As in the case of ‘localisation’, it forces the steel downstream to buy expensive raw material locally, thus rendering them uncompetitive to enter the export-market.

The authors of the Steel Master Plan are aware of this CDE-report but choose to ignore it. ‘Localisation’ and duties are now pursued by the Master Plan in spite of overwhelming evidence that it will only lead to the further demise of the South African steel industry.

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

For more information:
NEASA Media Department
media@neasa.co.za