State monopolies scupper industrialisation ambitions

If the government’s
industrialisation ambitions
are to bear fruit, urgent
policy intervention is
needed to stabilise labour
and reduce labour, logistics
and electricity costs.
And this means cutting
down on the “monopoly”
of state-owned enterprises
such as Transnet and
Eskom, according to acting
CEO of Arcelormittal
South Africa (AmSA), Dean
Subramanian.
“30% of our steel
production costs constitute
electricity costs, forcing us
to look at alternative power
sources. But if government
intervened and cut down
on the price of power, this
would not be necessary,” he
told delegates at the Metals
and Engineering Indaba
held in Johannesburg last
week.
Furthermore, added
Subramanian, the company
transports on average
about 210 000 tonnes of
iron ore per month on the
roads because they don’t
have access to a rail line
from Transnet Freight Rail
(TFR).
“It costs us US$50 per
tonne of iron ore but an
additional US$25 to get
that iron ore up from the
KwaZulu Natal ports to our
production plants. What
does that do to the price
of steel the downstream
producers are complaining
about?” he pointed out.
Subramanian
commented that fair
pricing was “vital” to help
protect the downstream
producers, highlighting
that policies for SOE
spending and procurement,
as well as their pricing
models, could go a “long
way” towards ensuring
that.
Other state-initiated
costs – such as the
proposed carbon tax –
needed policy intervention
as well to ensure effective
solutions were developed to
keep down the carbon tax
costs.
“We agree with the
need for it but appeal
for innovative solutions
that enable a more
efficient environment
and that the tax is used
for environmental
protection initiatives,” said
Subramanian.
He noted that this
responsibility did
not fall solely on the
shoulders of government
leaders. “Manufacturing
companies need to commit
to being efficient and
environmentally and costsensitive
as well, especially
if they require government
to intervene and protect
their livelihoods.”
Markus Hanneman,
CEO of SCAW Metals
Group, agreed, adding
that those countries that
survived production crises
such as the one the steel
industry was facing now
were the ones who had agile
governments that reacted
quickly to changes and
implemented new policies
speedily.
Deputy Shadow Minister
of Trade and Industry, Dean
McPherson, also called for
greater policy certainty
which would ensure a
stronger investment climate.
INSERT & CAPTION
30% of our steel
production costs
constitute electricity
costs, forcing us to
look at alternative
power sources.
– Dean Subramanian