Late 2023 steel industry bombshell


By Gerhard Papenfus

Quite astonishingly, a whole new set of duties to protect AMSA was introduced in December 2023. These duties include certain specifications of galvanized coil which AMSA does not even manufacture.  

Markets for these particular products, which were developed over many years, will simply disappear because there are no substitutes produced by AMSA - AMSA’s 60-year old antiquated mill and equipment simply cannot compete with the technology utilised by modern mills. 

However, introducing an import duty in respect of a product that AMSA does not manufacture is outrageous. 

At the time of the introduction of the initial import duties in 2015, NEASA warned that the upward pressure on prices caused by these duties would severely affect the competitiveness of the steel downstream, resulting in reduced volumes across the board. AMSA recently acknowledged that the steel industry has declined by 20% over the last few years, surely not as a result of the duties alone, but it had certainly played a dominant role. 

Since import duties negatively impact the customer of the entity benefitting from the duty, these duties trigger an evil cycle that, in the long run, proves to be unproductive for all involved. In the case of AMSA, as a result of the duties causing the decline of its customer base, AMSA will continuously be compelled to rely on sustained and even increased duty protection, which in turn will further accelerate the decline of its customer base. 

The destructive impact of the slow poison caused by the duties does not deter AMSA from selfishly squeezing all they can get out of the steel industry, and in doing so, shortsightedly, disregard the long-term impact on themselves, their customers, the steel downstream, and a century-old industry. 

Despite the negative impact, Minister Patel continuously introduces and renews these duties. This gives rise to the question: why is he doing this? Why persist with a policy that is making the steel downstream less competitive, accelerating the worrying tendency of de-industrialisation which is a major contributor to skyrocketing unemployment and consequent socio-economic instability? 

Stopping and reversing these illogical interventions by the Department of Trade, Industry and Competition is the only way to arrest the decline in the steel industry. Such a policy shift will cause upheaval in the short run, but in the long term, the industry will organically return to equilibrium. Persistent government interference in the steel industry will cause the inevitable slow demise of the industry and the eventual disappearance of AMSA.  

Gerhard Papenfus is the Chief Executive of the National Employers Association of South Africa.