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Steel industry: the protection of AMSA is irrational - then why do it?

Steel industry: the protection of AMSA is irrational - then why do it?

The Steel Industry is in de-industrialisation mode and the price of steel plays a significant role in this regard. Businesses in the steel downstream are downsizing and closing at an unprecedented rate due to them not being competitive, partly as a result of government’s policy of enforcing import duties to protect AMSA.

A few days ago, a fire broke out at AMSA’s Vanderbijlpark plant. This is causing a backlog, increasing AMSA’s inability to supply. Strangely, instead of suspending the duties, AMSA even declined an application to allow companies to import steel, at least for the duration of AMSA’s inability to supply the downstream.

The situation has already been aggravated by the envisaged closure of Saldanha Steel. Incidentally, the closure of Saldanha Steel, and the consequent job losses, is in contravention of one of the undertakings AMSA made in exchange for the introduction of duties.

Last week AMSA’s financial results for 2019 were published. It reflected an astronomical loss of R4.6bn. This is just further proof that duties cannot, and will not, save AMSA. It, however, delays AMSA’s eventual demise while its protection is causing havoc in the rest of the Industry.

AMSA’s financials clearly state that there is “a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern”. It further states that the international parent company will have to assist if the scenario of probable failure is to be reversed. ArcelorMittal International (AMSA’s parent body) has illustrated its desire to invest elsewhere by committing substantial funds to more than five other countries, but none in South Africa. As an example, an amount of R40bn is in the process of being invested in Mexico and India.

ITAC’s refusal to allow for duty-exempted imports, in the case where AMSA cannot supply, is a mystery. We consequently request the Department of Trade, Industry and Competition (DTIC) to clear up the confusion surrounding this decision to the Industry.

AMSA’s argument that the duties are needed to level the playing field, is utter nonsense. How can they even suggest this knowing full well that the duties protecting them cause the playing field not only to be uneven, but unplayable for the steel downstream. 

The DTIC, however, buys into this AMSA-driven notion which perhaps explains why AMSA’s latest request for additional duties on nine new tariff codes has not been rejected outright.

Be that as it may, the Steel Industry will do well to commence with preparations for life after AMSA.

This is a press release by Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA). He writes this in his personal capacity.

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