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Sacrificing The Steel Industry To Save Mittal

Opinion piece by Gerhard Papenfus, Chief Executive of NEASA

I do not claim to fully understand what’s currently happening in this space and the reasons for it.

The Steel Industry is in troubled waters. There are many indicators to this effect, but job losses is an important one. According to the MEIBC, the Steel Industry has lost 150 000 jobs over the last ten years, of which 40 000 jobs were lost in 2015 and 9000 in the month of November 2015 alone. The MEIBC is predicting a further 30 000 job losses in the Steel Industry this year.

There is more than one reason for this job-bloodbath. There is of course the effect of the global economy and certain factors over which we have little control. The MEIBC and its continuous unconstitutional and unlawful actions have exacerbated the situation in that it has deprived business of the flexibility to counter the global challenge. The MEIBC and those who benefit by this system, and those opting to sit on the fence, must take a huge amount of blame for the state of the Steel Industry.

For many years there was the impact of the senseless ‘import parity pricing’ arrangement – when that arrangement suited Mittal – and when it no longer suited them, they arranged for the introduction of the current, similarly devastating, protectionist duties and safeguarding measures, all aimed at protecting Mittal. They somehow always find a way to convince government that they deserve some extraordinary arrangement which either benefits or protects them. How they manage to do that only they will know, especially since protecting old, outdated, expensive liquid steel manufacturing facilities, the Industry’s demise will continue and millions of South Africans will suffer under inflated prices of downstream steel products.

Nobody can deny the challenge posed by China. But Mittal, at least for now, is posing a much bigger threat to downstream manufacturers. Since the introduction of protectionist duties in September 2015, and further looming safeguard duties, Mittal has increased its prices on 5 (five) occasions; the cumulative effect thereof is an increase of approximately 25 percent in the price of steel since September 2015, all the while denying local manufacturers the benefit of imported high quality, but cheaper steel. The effect in the market is severe.

Mittal is not a South African asset; it is foreign owned. There is nothing to suggest that it is doing anything other than pursuing its own short term interests. In this sense its objectives are not dissimilar to that of China. Thus far they have done nothing of concrete significance to improve their operations in order to serve downstream manufacturing better and cheaper.

These repeated Mittal-special arrangements affect all South Africans, either directly or indirectly. Employers and workers are affected immediately. But there will inevitably be a much wider ripple effect. When an industry as important as this one is dying, nobody will escape unscathed.

So, whereto from here? The answer isn’t obvious, but there must be a better solution than the one Mittal and the Department of Trade and Industry is pursuing. That, however, can only be the result of honest consultation and solution seeking, not the farce that took place until now.

We urge government to appoint a judicial commission of enquiry to determine the state of the Steel Industry: What the real causes are of the alleged situation Mittal finds itself in, the effect of various very unique arrangements with government, the suitability of current protectionist measures, the effect thereof on downstream manufacturing and to advise government on appropriate measures.

The Minister of Trade and Industry is called upon to take the initiative in this regard.

This opinion piece is by Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA)

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Annika van Heerden