R1.5bn incentive fund launched to support downstream steel producers

Government has earmarked an
amount of R1.5 billion to fund
an incentive programme to
protect the local downstream
steel industry.
It’s part of a raft of support
measures, according to
chief commissioner of the
International Trade and
Administration Commission
(Itac) in South Africa,
Siyabulela Tsengiwe, who said
that the Downstream Steel
Industry Competitiveness Fund
had been formally announced
late last week by economic
development minister, Ebrahim
Patel.
The move, which comes
in the wake of government’s
favourable consideration of calls
by ArcelorMittal SA for a 12%
safeguard duty on imported,
hot-rolled steel – over and
above the 10% import duty
imposed last year – prompted
CEO of the National Employers’
Association of South Africa, Dr
Gerhard Papenfus, to question
government’s commitment to
the downstream steel industry.
Papenfus said additional
duties on imported steel would
make it unaffordable for
local downstream producers
– including foundries, valve
and pump manufacturers,
and machining plants – to
manufacture
competitively.
“The question
is why the
government
would protect
a primarily
foreign-owned
entity, to the
detriment
of 10 000
downstream
steel
manufacturers.”
He said that Itac had also
advised in an “essential facts”
letter that the introduction of a
safeguard duty would not be “in
the public interest”.
Tsengiwe told FTW it would
be “premature” to comment on
the introduction of a safeguard
duty as Itac’s final report
on this issue would only be
released later this month (June).
“What I can say is that Itac has
an open and transparent policy
and we consulted broadly
during our investigation. The
downstream industry was given
an opportunity to state its case
and Dr Papenfus’s organisation
was also
represented,”
he said.
He added
that it was up
to the minister
of trade and
industry to
accept Itac’s
report and
implement,
or not
implement, the
findings and
recommendations.
Tsengiwe acknowledged that
the downstream industry had
taken a knock when the 10%
import duty was introduced,
highlighting however that
the Itac investigation had
revealed that the primary
steel sector could not survive
the oversupply of steel on
the market. He said that the
decision had been taken to
protect the ongoing survival
of the sector in South Africa
and prevent massive job losses
after it had become clear that
plant closures were “a very real
threat”.
“We are cognisant of
the challenges faced by the
downstream sector and are
considering offering rebates on
imported steel products that
are not produced locally,” he
said.
Director general
for industrial policy at the
Department of Trade and
Industry (dti), Garth Strachan,
said saving the country’s
primary steel industry, while
at the same time enabling
beneficial prices for local
downstream producers, was a
“a delicate balance” .
He pointed out that South
Africa had a “way to go” before
it was on par with other steel
producing countries’ efforts
to protect their industries but
added that history had shown
that when a nation’s primary
steel industry collapsed it was
“almost impossible” to revive it.
“South Africa cannot afford to
lose its primary steel making
capabilities, but nor can it
ignore the need to safeguard
the continued survival of its
downstream metals industry,”
he said.
Papenfus, in an opinion
piece, argued that large
foreign-owned companies such
as ArcelorMittal – the main
driver behind the application
for further safeguard duties –
should rather be forced to adapt
to the needs of the downstream
producers, not the other way
around.
According to him,
ArcelorMittal loyalists say that
if primary steel plants close
and the steel prices normalise,
overseas steel producers such
as China will dictate terms to
the local downstream sector.
“There are many competing
steel mills in China and who
dictates that the downstream
sector buys from China?”
FTW was unable to reach
ArcelorMittal for comment
before going to print.
INSERT & CAPTION
Safeguard duties
only serve as a
slow poison to the
downstream sector.
– Gerhard Papenfus