Mea culpa -- but we have changed
‘We are a different company today, with strong values’
IT was with a palpable sense of relief and closure that we welcomed the agreement between ArcelorMittal South Africa and the Competition Commission.
This agreement, pending Competition Tribunal approval, will see us honour the R1.5-billion fine imposed as well as invest an additional R4.6 billion on plants and equipment over the next five years.
In what universe, you may ask, does a large company welcome paying a fine?
For many years, steel producers globally have been operating in a sector in crisis, hit by plunging prices due to overcapacity in China.
In South Africa, steelmakers have been bracing for a further increase in cheap imports due to the global steel glut, with — until fairly recently — little support from the government, while other countries have taken significant measures to protect their local steel sectors.
In this context, the last thing a company such as ArcelorMittal South Africa needs is the negative association with legacy issues — anticompetitive practices that ceased many years ago — and behaviour we no longer associate ourselves with.
These cases relate to activities that occurred between 2003 and 2008, during a period when the commodities cycle was robust versus the situation today, where we are fighting for the survival of the industry as a whole and trying to protect jobs.
We have admitted guilt to allegations of price-fixing, allocating customers and sharing commercially sensitive information in our longsteel division; and allegations of price-fixing in the scrap metal division.
These activities were deeply damaging to our business, to our reputation and to our relationships.
I am happy to report that the cleanup of our operations initiated by my predecessor has already shown good results and is continuing apace. We are a totally different company today, with strong values and sound governance.
The settlement is part of a holistic approach to address our challenges and mend relationships with all our stakeholders.
It is gratifying that the government has acknowledged the imperative of a local primary steel industry in a country’s economy.
Minister of Trade and Industry Rob Davies has made it clear that maintaining a sustainable steel industry and the optimal use of South Africa’s resource endowment advantage is vital to avoid the country becoming a steel importer, which would leave the upstream and downstream industries at the mercy of the global steel market.
In support of this position, import duties have recently been implemented on various steel products, and applications for further safeguard measures are pending. The government has also taken the step of designating minimum local-content thresholds for steel on a number of products.
These are positive developments that will contribute to the sustainability of the South African steel industry and to economic growth.
While the R1.5-billion penalty is significant, especially under current market conditions, we recognise our behaviour was not in line with that of an industry leader.
The agreement with the commission consigns this kind of conduct to the past. Our focus now is to protect the industry going forward.
We have also committed to invest R4.6-billion over the next five years. This investment is a combination of upgrading our current capability, staying abreast of technological advances and enhancing output volume. It is aimed at preserving about 1 400 jobs — and creating new positions.
In addition to these investments, our proposed reopening of Evraz Highveld Steel and Vanadium’s heavy-section steel mill will save further jobs.
We take seriously our meaningful contribution to the fiscus and job creation in South Africa. Steelmaking contributes 1.1% directly to South Africa’s GDP, and a further 0.4% indirectly. More than 190 000 jobs are attributed to primary steelmaking and the immediate downstream industries, while an additional 100 000 jobs are created through suppliers.
Steel is a key enabler of every part of the South African economy — including the automotive, mining, construction, energy and infrastructure sectors, all of which have been identified as major growth drivers by the National Development Plan.
The top five steel-consuming industries together contribute some R600-billion to South Africa’s GDP (15% of the total) and employ more than eight million people.
Being a leading steel producer in the country brings with it a certain responsibility. We are firmly committed to being a good corporate citizen and making a valuable contribution to the socioeconomic development of the country and the communities we operate in.
Our intention to invest capital and abide by the fair pricing principles which have been agreed with the government reflects our commitment to the growth of the economy through creating a sustainable business and growing the downstream industry by supporting our customers.
We are already on a bold new path, and we welcome the fact that we no longer carry the mantle of a negative legacy on our shoulders.