This sector has shed 40 jobs every day in South Africa since 2008
South Africa’s metals and engineering sector has suffered major job losses over the last fifteen years, with worries that continued stagnation in the country’s economy could lead to another jobs bloodbath.
Tafadzwa Chibanguza, Chief Operating Officer at the Steel and Engineering Industries of Southern Africa (SEIFSA), said that the sector currently employs 362,871 people – a massive drop from from the 577,507 people employed in 2008.
This equates to 214,636 jobs losses over the period – or 40 jobs per day.
“Considering the steel sector’s induced economic multiplier of 2.7 times, the employment multiplier of 6 times and the dependency ratio of between 7 to 10 people relying on each formal job, the sectors employment trends spell wide scale social and economic disaster,” Chibanguza said.
The steel and engineering sector is essential to the South Africa’s industrial base, converting the nation’s vast mineral wealth to final engineered products, locking in higher degrees of value domestically.
The sector is also crucial for inputs in other sectors, including agriculture, mining, the automotive sector, construction, and the nation’s electricity supply.
It is also key for exports, with 40% of total production being exported, increasing the nation’s foreign exchange receipts by $20 billion (R375 billion) annually.
Nevertheless, the sector is not realising its potential, with ArcelorMittal South Africa (AMSA) announcing in November last year that it would close its Longs steel operations in Newcastle and Vereeniging.
The group said that, despite its best efforts, it was unable to overcome the nation’s slow economy, difficult trading environment, high logistics costs, load shedding, and scrap’s advantage over iron ore in respect to steel production as a consquence of policy.
“The prospect of this development materialising is a major cause of concern which will only add to exacerbating the downward spiral to employment in the sector,” Chibanguza said.
“Taking into account the 3,500 employees that will be directly affected by the plant closures, projecting the 2.9% (Coumpound Annual Growth Rate) rate of decline across the entire steel and engineering sectors employment and applying the steel sector employment multiplier, on a five-year horizon, SEIFSA estimates (this) could amount to a staggering 293,754 direct and indirect job losses.”
Hopeful signs
However, in a trading statement and business update for the year ended 31 December 2023, AMSA said that it has held talks with various stakeholders, including the Minister of Trade, Industry and Competition Ebrahim Patel, Transnet, the IDC and organised labour, which were “productive”.
“These stakeholders have expressed widespread concern regarding the negative economic impact of the closure. The Company was requested to consider what support was needed to change the closure decision,” the group said.
“AMSA reiterated that it did not need any preferential treatment or subsidies, rather it required Government to ensure that a level playing field exists for South Africa’s primary steel producers, by addressing the structural constraints affecting the steel industry. The engagement process has been constructive.”
However, the group said that tackling these structural shortcomings are complex, which requires the commitment from the government, state-owned enterprises, its own employees and the group’s customers and suppliers.
The group said that it will make a further announcement over the potential closures in the near future.
The challenges that the group is facing are clear to see in its trading update, with the group’s headline earnings per share expected to drop from a R2.34 headline profit per share to a headline loss per share within a range of R1.55 and R1.85 per share (a decrease of between 166% and 179%).
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