Ina Opperman

By Ina Opperman

Business Journalist

Has the Steel Master Plan collapsed?

The steel industry supported the Steel Master Plan when it was unveiled in 2021, but now government seems to ignore industry requests to meet.

The Steel Master Plan was pitched as the platform where government, business and labour, that all have a direct and vested interest in seeing the steel industry prosper, would come together and work collaboratively to ensure the industry thrives, but now it seems that the plan has collapsed and the industry is disintegrating.

The South African steel industry has been in a downward spiral since the global financial crisis of 2009, with manufacturing’s contribution to the country’s gross domestic product (GDP) decreasing by 44% from 24% in 1990 to 13% in 2018.

When minister of trade, industry and competition, Ebrahim Patel, unveiled the new Steel Master Plan in June 2021, he said the plan is a blueprint for the industry on how to re-energise itself and expand production. It was developed in consultation with all stakeholders from the industry, including primary steel producers, downstream steel players, metal fabricators and organised labour.

The steel industry is the foundation of any modern economy and is essential for every single sector. However, Elias Monage, president of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), now warns that without a healthy and vibrant local steel industry, South Africa will simply not be able to integrate and develop itself or the rest of the continent.

“The steel sector and South Africa urgently needs clarity on policies, consensus on action plans and realised deliverables on the ground in order to instil confidence in the viability of the country to boost competitiveness and attract both local and foreign direct investment.”

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ArcelorMittal’s potential closure

Monage says ArcelorMittal South Africa’s announcement last week about the potential closure of its operations in Newcastle and Vereeniging, as well as ArcelorMittal Rail and Structural, is a major set-back for the base of the industrial sector and industrialisation more broadly.

“This development also raises the sharp question whether the grand aspirations of the Steel Master Plan, to reindustrialise the steel industry, are beginning to disintegrate under our watch. The unfortunate reality is that the lofty goals set by the plan, to charter a roadmap to reenergise the sector, expand production and demand across the steel and fabrication value chain are becoming increasingly illusive.”

The plan was sold as a deviation from the old and unproductive approach where government directs the path industry should take and one where different stakeholders lobby the government toward their respective ends in an unstructured way.

“It was meant to be a unifying platform, where meaningful and active collaboration took place to arrest the rapid decline the industry currently experiences through short-term interventions and to grow the industry through longer dated interventions. It was also meant to open avenues of communication and collaboration between all stakeholders.”

SEIFSA was a signatory to the founding document and nominated a number of captains of industry to lead various workstreams. The SEIFSA team has invested considerable resources to the work of the SMP unlike some of the nay-sayers that wrote off the plan at the outset.

ALSO READ: Closure of steel operations a devastating blow to Newcastle’s economy

No meeting with minister Patel

Monage says SEIFSA made numerous formal requests for a meeting with the minister over the past year on the scrap metal export ban and other much wider and arguably more important and strategic industrial policy concerns, but the meetings never materialised and SEIFSA’s requests fell on deaf ears.

“We understand and acknowledge that ministers leading key departments and portfolios are extremely busy, but what we cannot accept is the lack of decisive leadership from the department, resulting in numerous decisions being strung out and not forthcoming.”

Monage points out that it is ironic that some decisions, like the ban on scrap metal exports, with all its adverse implications, received priority preference and relatively fast decision turn-around times. A further concern for business is the delays in appointing permanent staff to critical decision-making roles, as a significant number of the department’s staff in key decision-making roles are in an acting capacity, contributing to the delays in decision-making.

He adds that public consultation processes on regulations are often undertaken when it is seemingly clear that a decision has already been taken.

“This suspicion on the part of business is supported by the unwillingness of the ministry to engage industry on a more in-depth basis on some of the more rational proposals submitted by industry, as in the case of the scrap metal export ban.”

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Department is moving goal posts – SEIFSA

In addition, Monage says, there has been a very concerning shift in the goal posts regarding the motivation to extend the scrap metal export ban, which is now leaning to input cost support for the scrap-based mills and the country’s decarbonisation efforts, whereas the original reasons used to force the decision through were for security reasons and to protect infrastructure.

“Introducing industrial policy by stealth and misleading economic signals like this renders the Steel Master Plan a platform to rubber-stamp and legitimise decisions, including those that do not enjoy support and alignment by a significant block of employers.”

Monage points out that the plan was meant to deliver a comprehensive industrial policy framework, where a total industry perspective would be taken and complementarities across the value chain enhanced.

“Sadly, what we are witnessing is the opposite, where policy is implemented in a fragmented manner, with a short-term view and with pockets of industry players pit against each other. The scrap metal export ban is one such divisive and market-distorting development.”

The industry is quickly losing faith in the Steel Master Plan process and it is obvious but worth mentioning the withdrawal of this constituency from the plan would virtually render it moot, Monage says.

“The steel industry simply cannot continue to invest the amount of time, effort and resources it did so far for altruistic reasons, particularly when the experienced reality is one of a continued deterioration of the business and operating environment, company closures and job losses.”

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