Steel industry: AMSA’s arrogance and the DTIC’s naivety KNOWS NO BOUNDS

Steel industry: AMSA’s arrogance and the DTIC’s naivety KNOWS NO BOUNDS

During the course of 2015, after a visit to then-President Zuma by the owner of ArcelorMittal International, the steel magnate Lakshmi Mittal, the DTI made a 180-degree about-turn in respect of its approach towards South Africa’s sole primary flat steel supplier, the monopolistic ArcelorMittalSA (AMSA).

Prior to Mr Mittal’s visit, the DTI was entirely opposed to import duties. In fact, the last 5% duties had been scrapped by the DTI before his visit.

The effect of Mr Mittal’s visit resulted in:

  •  a lucrative BEE deal that cost AMSA millions of Rands; and which
  • in return for the favour, resulted in the introduction of 10% customs duties and soon thereafter a further implementation of 12% safeguard duties. 

Although these duties caused havoc in the steel downstream, AMSA’s woes, their loss-making trajectory, continued. Duties were not enough; they had to come up with a new plan.

The newly proposed Steel Master Plan presented AMSA with a new opportunity.

The Department of Trade, Industry and Competition (DTIC, formerly the DTI), instead of drafting the Plan, requested a protégé of AMSA to draft it. The end result is a plan which in its entirety is aimed at benefitting AMSA - a colossal, ineffective, loss-making monopoly. 

The new Steel Master Plan, if introduced, spells disaster for the entire industry. The Plan, among others, makes provision for the following:

  • for every ton of steel used in South Africa, R5 to R10/ton must be paid to fund a Steel Council that will enforce an arrangement which will compel SOE’s, the Government Infrastructure Build Programme, municipalities, etc. to buy expensive AMSA steel under the disguise of ‘localisation’;
  • the banning of certain items used by the steel industry’s production processes. This list of items was clearly compiled by AMSA, since the importation thereof competes with AMSA’s products; and
  • for the Steel Council to work closely with the prosecuting authority and SARS to prosecute those who do not adhere to this ‘localisation’ drive. 

Not only will the steel downstream be expected to pay in order to keep AMSA alive, but also the taxpayer; just another tax burden to keep an inefficient entity alive.

The blatant, in your face, ruthless, to-hell-with-the-downstream nature of this proposal is simply mindboggling. 

The Plan does not make any mention of the scrapping of all duties that the Industry so desperately needs to enable it to import the current shortfall created by AMSA’s poor performance.

The Plan does not, in any way, grapple with the notion, that for the Steel Industry to prosper as a whole, access to duty-free imported raw material should be allowed.

Since the obvious intent of the new Master Plan is to indiscriminately protect this malignant tumor terrorising the Steel Industry, nothing constructive is proposed.

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

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