ArcelorMittal (SA) has made a final decision on mothballing its long-steel operations at its Newcastle Works, Vereeniging Works, and the rail and structural subsidiary, AMRAS. The announcement will have a devastating impact on a number of fronts, surrounding communities, suppliers, contractors and the broader metals and engineering sector.
SEIFSA has repeatedly warned of a socio-economic catastrophe should ArcelorMittal shutter its plants. Some of the most alarming estimates over and above the reported 3,500 direct jobs on the line are the medium-term impact of second-round effects in the order of 20,000 to 25,000 jobs and in the longer-term multiples of more than this. The effect of this latest development will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining sub-sectors of the economy and all who work in it.
This development presents a major setback to the base of the industrial sector and industrialisation more broadly. The tragic reality is that the lofty goals set by the Steel Master Plan (SMP) to charter a roadmap to re-energise the sector, expand production increase demand across the steel and fabrication industry value chain and introduce an industrialisation programme have failed dismally. The SMP was meant to deliver a comprehensive industrial policy framework, where a total, inclusive, industry perspective would be taken and complementarities across the value chain enhanced. Sadly, what we are witnessing is the opposite, wherein the policy is implemented in a fragmented manner, with a short-term view and with pockets of industry being pitted against one another.
ArcelorMittal’s year-long plea for help from the government has come to naught. The fact of the matter is that ArcelorMittal never had a prayer – sadly we’ve seen this play out before with the closure and mothballing of Highveld Steel and Saldanha respectively, all at the feet of a dithering government too slow to react and offering too little too late. For South Africa’s economy, ArcelorMittal’s decision means that there will be fewer players in the country producing long-steel products such as fencing material, reinforcing bars, beams, rails and profiles that are used in the construction, mining and manufacturing sectors.
Ultimately, the downsizing at ArcelorMittal highlights three key industrial policy tenets. Firstly, if the government lacks the capacity to do everything, then it should focus on its core functions – which in the economy means infrastructure, building human and social capacity and maintaining security. Second, the government’s role in industrial policy is to shape an enabling environment that aligns national and business interests. It is not to mediate short-term compromises between competing stakeholders. Finally, industrial policy should be used to rescue struggling industries or companies, especially where the long-term socio-economic benefits outweigh the costs.
The de-industrialisation trajectory that has been observed in the sector can be attributed to the lack of a well-considered and all-encompassing metals sector industrial policy. The South African steel industry reiterates its commitment to collaborate with the government to ensure that policy decisions are made in the best interest of the industry and the nation. A holistic approach that protects the diversity and sustainability of the entire steel value chain is essential for the future success of the South African steel industry.
A sectoral engagement between Minister Tau representing the Department of Trade Industry and Competition (DTIC) and the Metals and Engineering Sector took place on the 20th of November 2024. This meeting, a first formal engagement, with the Minister sought to provide a platform wherein the Ministry and Industry could come together and develop a way forward to arrest the rapid decline in the sector’s performance. The key takeaways from this session include:
- urgency is a must;
- we are not operating in a business-as-usual scenario and therefore interventions need to be as radical and ambitious as deemed necessary under the circumstances;
- more of the same is likely to produce the same result, with negative consequences for labour, revenue collection and the long-term sustainability of the metals and engineering sector;
- the sector is on the edge of the point of no return and therefore without ambitious action de-industrialisation will continue and only accelerate; and
- if it is delayed it may become harder and more expensive to reverse.
SEIFSA, representing both the up and downstream value chain calls on the government to urgently prioritise a long-term, inclusive strategy for the steel industry. A collaborative approach that considers all stakeholders in securing the future of South Africa’s steel industry and its critical role in economic development.
The closure of ArcelorMittal longs steel business is a profound policy failure. Nevertheless, steel still has the potential to be the core of the re-industrialisation programme for South Africa. What is now required on an urgent basis in the face of this crisis is leadership – a focused character and decisiveness – that up until now has been missing and without which we will be doomed to the same results, with negative consequences for the long-term sustainability of the metals and engineering sector.
