Government earmarks R1 Billion bailout for AMSA closures
The government is considering a R1 billion bailout to rescue ArcelorMittal South Africa (AMSA) following the announcement of its Long Steel mills' closure in Newcastle and Vereeniging.
A R1 billion government bailout is being considered to save ArcelorMittal South Africa (AMSA).
The news that AMSA was closing its Longs Steel mills in Vereeniging and Newcastle sent the town into a tailspin with up to 3500 direct and indirect job losses – with Newcastle the most affected.
The closure, primarily driven by high energy costs, logistical constraints, and an export scrap tax issue, is set to significantly impact the local steel industry, with the company estimating around 3,500 direct and indirect job losses.
The shutdown could have a ripple effect, raising prices for local manufacturers and further diminishing South Africa’s global competitiveness, potentially leading to job losses of up to 100,000 by year-end.
The proposed rescue package comes after crisis talks between AMSA CEO Kobus Verster and representatives of the Department of Trade, Industry and Competition (DTIC) and the National Treasury.
Officials said the package is aimed at stabilizing AMSA’s operations and preventing further damage to the steel sector.
Involvement from key state entities, such as the Industrial Development Corporation (IDC), the Public Investment Corporation (PIC), and the Unemployment Insurance Fund (UIF), is also expected.
Despite the urgent nature of the crisis, some government officials have voiced opposition to the bailout, citing concerns about the long-term sustainability of AMSA and its failure to invest in plant upgrades even during profitable years.
The IDC, already a shareholder in AMSA, has previously contributed R1 billion to the company and plans to continue engaging with stakeholders on potential solutions.
Amid the discussions, there is hope that Indian billionaire Lakshmi Mittal, Chairman of ArcelorMittal, might offer assistance.
President Cyril Ramaphosa recently met with Mittal at the World Economic Forum in Davos, raising hopes of a possible partnership to rescue the embattled company.
Commenting on the latest developments, Johan Pieters, Chairman of the Newcastle Growth Coalition expressed hopes that there would be a positive outcome as the future of AMSA and the South African steel industry hangs in the balance.
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