Indian billionaire the lifeline for Toyota, VW, and 100,000 South African jobs

Steelmaking mogul Lakshmi Mittal met with South African President Cyril Ramaphosa in Davos on Wednesday (22 January) as the country aims to prevent the impending closure of steel mills vital to the local economy.
These mills are critical to the country’s economy and industries, such as car manufacturing, construction, and mining.
Before meeting with Ramaphosa, Mittal had discussions with Finance Minister Enoch Godongwana, Trade and Industry Minister Parks Tau, and Electricity Minister Kgosientsho Ramokgopa.
While no firm decisions were made, the urgency of the situation was evident, reported Bloomberg.
Earlier this month, AMSA announced its plan to close three plants, including the Vereeniging and Newcastle steel mills, by the end of January.
AMSA cited several challenges, such as unreliable freight rail services, soaring electricity costs, strict rules requiring them to sell scrap metal at discounted rates, and a struggling economy, as reasons for the closures.
Shutting down these plants would have a major impact. The Vereeniging and Newcastle mills produce specialized steel products that no other local companies currently make.
Their closure could disrupt President Ramaphosa’s vision of an economic revival driven by a R4.8 trillion infrastructure project.
Industry experts warn that over 100,000 well-paying jobs are at risk in a country where nearly 30% of people are unemployed.
Lucio Trentini, the CEO of the Steel and Engineering Industries Federation of South Africa, said that closing the mills would be a “huge setback” for South Africa’s industrial and economic development goals.
He emphasised the importance of finding a solution to avoid or at least delay the closures.
Part of AMSA’s challenges stem from government policies. Since 2013, local scrap metal sellers have been required to sell their scrap in South Africa at prices 30% below international rates.
On top of this, a 20% tax on exporting steel scrap was added in 2020. While other local steelmakers rely on scrap metal to produce steel, AMSA uses iron ore, making these rules particularly harmful to their business.
Mittal’s relationship with the South African government has been complicated. After acquiring Iscor, the country’s former state-owned steelmaker, in 2003, Mittal’s company has faced accusations of charging excessive prices and neglecting plant maintenance.
In 2016, AMSA was fined $110 million for breaking antitrust laws. Despite this rocky history, Mittal’s involvement might be crucial in keeping South Africa’s steel industry alive.
The consequences of the closures would ripple beyond steel production. South Africa’s automotive industry, which employs more than 116,000 people, relies heavily on AMSA’s steel.
Major carmakers like Volkswagen and Toyota, as well as automotive parts manufacturers, have urged AMSA and the government to find a temporary solution.
In letters to AMSA and government officials, industry representatives pointed out that they use 70,000 tons of “speciality long-steel grades” annually, which only AMSA can produce locally.
They also warned that they have not had enough time to secure alternative suppliers, and switching to new suppliers would require extensive testing and certifications.
Without AMSA’s steel, factories might shut down, leading to increased imports and risking thousands of jobs.
AMSA has not commented publicly on the ongoing discussions but has previously requested changes such as higher tariffs on imported steel and reforms to scrap metal regulations.
Despite a year of negotiations, the government’s efforts to address these issues have not yet succeeded.
However, Mittal’s recent meetings with South African leaders suggest a renewed effort to find a solution.
Resolving AMSA’s problems could stabilise essential industries and protect tens of thousands of jobs. If no agreement is reached, South Africa’s plans for economic recovery and industrial growth could be severely undermined.
Reported with Bloomberg