Eric Naki
Political Editor
3 minute read
4 Dec 2019
9:16 pm

Govt trying to save Saldanha Steel from cheap imports slammed by smaller steel firms

Eric Naki

Government has come under fire for trying to keep Saldanha Steel, a subsidiary of ArcelorMittal South Africa (Amsa) open at all cost, to the extent of resorting to protectionist tactics that adversely affect downstream steel firms.

Picture: iStock

This after the department of trade, industry and competition (DTIC) offered Saldanha Steel concessions to enable the Western Cape-based plant to continue trading and avoid massive retrenchments. Reports came that two potential buyers had expressed interest in purchasing the plant, a move that could save the 900 employees that were facing lay-offs at Saldanha.

The DTIC is trying to entice the prospective buyers while encouraging Amsa management to engage with them to prevent the closure of the plant, which began operations over 20 years ago.

According to the National Employers’ Association of South Africa (Neasa) CEO, Gerhard Papenfus, government wants to keep Amsa’s Saldanha Steel plant open at all costs.

The downstream steel firms oppose the 20% duties imposed on steel imports aimed at helping Amsa deal with cheap steel from foreign companies, particularly China’s. The DTIC also engaged with Amsa’s management on its plan to support the firm to reduce its costs.

The reduction would focus, among other things, on electricity, and water and rail tariffs, something that the DTIC believes would “providing considerable cost savings” to Saldanha Steel.

Papenfus said tariff duties would prevent the steel downstream industry from importing cheaper and better-quality steel – which served no purpose other than rapidly eroding South Africa’s downstream manufacturing capacity and delaying Amsa’s demise. He accused the DTIC of taking efforts to save an unsustainable enterprise to an unprecedented level.

“When will we learn that, unless an institution can sustain itself and prove its worth, it is doomed – not if, but when. The help government is offering just delays the inevitable – in the process draining the fiscus. Amsa, instead of being a strategic asset, is a strategic liability, unless a prospective buyer can prove that it will contribute to South Africa without protectionist duties and subsidies, the same scenario will play out,” Papenfus said.

He argued that in the so-called concession, there were no cost savings involved because someone was paying. The DTIC solution was merely a subsidy. In the case of protectionist duties, the downstream steel players were bearing the brunt.

He said cheaper electricity, water and transport amounted to a “double-whammy” for the downstream industry. For the taxpayer, a subsidy simply amounted to supporting another Eskom, SAA and a multitude of other failing institutions – just another attempt at keeping a deceased institution on life support.

“Amsa itself has declared that Saldanha Steel cannot be run profitably and that the possibility of an outside buyer, coming to its rescue, is remote. Surprisingly, however, there is talk about just such a buyer, which raises the concern that the plant will be offered the advantage of protectionist duties, cheaper power, rail and water. If this is the case, South Africa would be locked into a deal that will have disastrous consequences for the steel industry and South Africans in general,” he said.

“We can only hope that good sense will prevail going forward,” Papenfus added.

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