Local steel sector is the reinforcing in SA’s economy
The argument about whether South Africa has truly benefited from its primary steel industry since the privatisation of the stateowned steel producer is one which rears its head from time to time. I believe the context for this argument must be a consideration of the consequences if there was no primary steel industry, as well as the overall contribution of the steel industry to the growth of the South African economy.
For many years, steel producers globally have been operating in a sector in crisis. Most have been hit by plunging prices due to overcapacity in China. In South Africa, steelmakers have had to deal with an unprecedented increase in cheap imports, which has severely affected demand and left us fighting for the survival of the industry and trying to protect jobs.
In line with other countries that have taken measures to protect their steel sectors, we are grateful for the support of the government in the past few years, with the imposition of import duties and safeguards, and the designation of minimum local content for steel used in state projects.
This is a clear sign the government has acknowledged the imperative of a local primary steel industry. It is vital we avoid becoming a steel importer, leaving upstream and downstream industries at the mercy of the global steel market. South Africa’s distance from the nearest steelmaking countries increases the risk to supply and poses challenges for importing due to the long lead times and high transport costs.
A domestic steel industry lessens these risks and offers protection against raw material market volatility.
Steelmaking remains a key strategic industry, making a meaningful contribution to the fiscus and job creation. Each tonne of steel produced creates jobs and provides value through the beneficiation of natural resources. Every 1 000 tonnes produced locally adds R9.2-million to GDP, provides three jobs directly and three indirectly, enables domestic procurement to the value of R5.3-million, of which R500 000 is with small and medium enterprises, and contributes R130 000 in tax to the fiscus.
Steelmaking represents 1.5% of GDP (1.1% directly, 0.4% indirectly) and accounts for 190 000 jobs in the primary and immediate downstream industries, with 100 000 more jobs through suppliers, such as those transporting raw materials and steel.
Further, the industry plays a critical role in mineral beneficiation: steel quadruples the economic value of South Africa’s iron ore, adding R26-billion in value. Steel is a key enabler of every part of the 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 steelconsuming industries together contribute R600-billion to GDP (15% of the total) and employ more than eight million people.
South Africa has sub-Saharan Africa’s only primary steelmaking capability. This is an encouraging opportunity to supply steel to neighbouring economies, many of which are growing at more than 5% per annum.
These numbers, while impressive, do not include the capital investment by local steelmakers into ensuring the sustainability of the steel industry. ArcelorMittal South Africa alone has committed to investing R4.6-billion over the next five years. Being part of the world’s leading steel company with a presence in over 60 countries brings significant benefits for our South African business and, in turn, the local steelmaking industry and the national economy.
The ArcelorMittal Group’s agreement to underwrite the R4.5-billion rights offer in 2016 allowed our South African business to substantially reduce debt and provided access to funds for capital investment to upgrade and maintain our facilities and deliver on our commitment to the government. This benefit extends to having access to the group’s research and development expertise. This innovation in steelmaking is helping to drive the development of more sustainable construction and manufacturing materials.
The local steel industry is a core employer in key industrial ecosystems — Vanderbijlpark and Vereeniging (Gauteng), Saldanha (Western Cape) and Newcastle (KwaZulu-Natal). Two-thirds of households in Vanderbijlpark and Newcastle and a quarter in Saldanha depend on the steel industry for their livelihoods. The consequences of any closures on local communities would be catastrophic.
The impact of the industry on communities is further extended by the socioeconomic investment of steel companies, including training and skills development, enterprise and supplier development, local procurement, infrastructure development and corporate social investment.
It would take more than a decade to reestablish the steel industry in South Africa were it to dissolve. This could only be detrimental to the economy. We must be proud of what the industry has achieved, and must work together to ensure we support a sustainable industry that can continue to contribute to the growth and development of the country.