Billionaire-backed ArcelorMittal SA\u2019s plans to shut down a century-old steel mill in South Africa are holding President Cyril Ramaphosa\u2019s dream of fostering a $257 billion infrastructure boom to ransom.<\/p>\n\n\n\n
That plant\u2014and two others it wants to idle\u2014supplies what builders need for the vaunted exponential rollout of power-transmission towers, rail lines, and new roads\u2014projects that the leader says will turn the country into \u201ca construction site,\u201d boost sluggish growth, and provide much-needed employment.<\/p>\n\n\n\n
They are also crucial to the jewels in South Africa\u2019s manufacturing industry\u2014its auto plants\u2014and provide the speciality steel for the drills used in the country\u2019s precious metal mines, which rank among the world\u2019s biggest.<\/p>\n\n\n\n
Rand York Castings, one of the nation\u2019s largest steel fabricators, said it may move a unit that makes civil engineering products it exports globally to India. <\/p>\n\n\n\n
Industry groups estimate that at least 100,000 relatively high-paying positions are at stake in South Africa, where almost a third of the labour force is jobless.<\/p>\n\n\n\n
\u201cIt\u2019s a devastating blow to South Africa\u2019s industrialisation and infrastructure-development goals<\/strong>,\u201d said Lucio Trentini, the chief executive officer of the Steel and Engineering Industries Federation of South Africa, which represents more than 1,300 companies employing 170,000 people. <\/p>\n\n\n\n \u201cIt was a decision that we were hoping could be at best avoided, at worst delayed.\u201d<\/p>\n\n\n\n On 6 January, the company, which Lakshmi Mittal formed in 2006 by merging his Mittal Steel with France\u2019s Arcelor, said that after a year of inconclusive talks with the government, it would shutter its long-steel plants in Vereeniging and Newcastle at the end of the month. <\/p>\n\n\n\n A dysfunctional freight rail service, soaring electricity prices, a low-growth economy and government policies that cut costs for its local competitors triggered its call.<\/p>\n\n\n\n \u201cWe cannot delay this decision any longer,\u201d ArcelorMittal South Africa Ltd. CEO Kobus Verster said. \u201cThe government is willing to listen but is not really able to make decisions. Could they have done more? Of course, they could.\u201d<\/p>\n\n\n\n South African Trade Minister Parks Tau has since then put together a team that\u2019s \u201cworking day and night\u201d with AMSA, as the company is known, to stave off the closures, said Yamkela Fanisi, his spokesman.<\/p>\n\n\n\n \u201cThe steel industry is critical in the reconstruction and recovery plan for the South African economy,\u201d Fanisi said.<\/p>\n\n\n\n Vincent Magwenya, Ramaphosa\u2019s spokesman, referred queries to Tau\u2019s department.<\/p>\n\n\n\n Mining Equipment Manufacturers of South Africa interim CEO Juliana Makapan said the closures could disrupt supply chains and cause skilled workers to emigrate. <\/p>\n\n\n\n The National Transmission Company South Africa, which oversees the electricity grid, said it\u2019s assessing the impact of the wind-downs.<\/p>\n\n\n\n AMSA and industry organisations say the closures are partly due to a testy relationship between the government and ArcelorMittal. <\/p>\n\n\n\n The company took over former state-owned steelmaker Iscor Ltd. in 2003 and has since been accused of skimping on capital expenditure. <\/p>\n\n\n\n In 2016, local antitrust authorities fined it the equivalent of $110 million for anti-competitive behaviour.<\/p>\n\n\n\n AMSA didn\u2019t respond to requests for further comment.<\/p>\n\n\n\n As a result, the government fostered challengers to AMSA by forcing discounts on scrap prices for those competitors through a price preference system it introduced in 2013, and imposing an export tax of 20% on the material in 2020.<\/p>\n\n\n\n Scrap collectors can only export if no local buyer wants the material. And if domestic users want the product, they get a 30% discount on the international scrap price. <\/p>\n\n\n\n Also, the scrap dealer has to deliver it to them no matter where they are in the country. As a result, the material lingers in yards, incurring additional costs.<\/p>\n\n\n\n \u201cIt\u2019s an enormous amount of bureaucracy,\u201d said Mark Fine, the owner of Fine Trading, a major Cape Town-based scrap dealer. \u201cIt defies any kind of economic logic.\u201d<\/p>\n\n\n\n The Industrial Development Corp., a South African state development bank that\u2019s the biggest shareholder in AMSA after ArcelorMittal, also invested in its rivals.<\/p>\n\n\n\n A number of steelmakers and so-called mini-mills now out-compete AMSA for the market for less-specialised products the company produces. Those include Scaw Metals, Cape Gate Ltd. and Unica Iron and Steel Ltd.<\/p>\n\n\n\n The IDC is talking to stakeholders with a view to \u201cmaintaining and expanding industrial capacity,\u201d it said in response to queries the government is reviewing both the PPS and the export tax, the trade ministry\u2019s Fanisi said.<\/p>\n\n\n\n AMSA, which also closed down the Saldanha Steel mill in 2020, has turned down a number of offers for its shuttered or struggling plants.<\/p>\n\n\n\n Scaw has made multiple offers to buy or operate Vereeniging, which supplies the crucial auto sector, and can now make some of the products itself, Commercial Director Mzamo Mjekevu said.<\/p>\n\n\n\n While both Scaw and Cape Gate are expanding and upgrading their operations, Mjekevu said the local market is too small for rival mills to invest in some specialized projects.<\/p>\n\n\n\n At a press briefing on 17 January following her first visit to AMSA\u2019s Vanderbijlpark operation, Labour Minister Nomakhosazana Meth said the government was engaging with the company and that the situation was \u201curgent.\u201d <\/p>\n\n\n\n Sitting alongside her, AMSA CEO Verster said time was running out for a resolution.<\/p>\n\n\n\n The industry isn\u2019t holding out much hope that it will come. <\/p>\n\n\n\n \u201cThe horse has bolted,\u201d Seifsa President Elias Monage told eNCA television. \u201cWe can talk until the cattle come home. If nothing happens, it\u2019s a problem.\u201d<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" SEIFSA CEO says the shutdown of a century-old steel mill in South Africa would be a devastating blow to South Africa\u2019s industrialisation and infrastructure development goals.<\/p>\n","protected":false},"author":59,"featured_media":742071,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[8377,21475,853,21474],"class_list":["post-807762","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-arcelormittal","tag-mining-equipment-manufacturers-of-south-africa","tag-south-africa","tag-steel"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=807762"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807762\/revisions"}],"predecessor-version":[{"id":807891,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807762\/revisions\/807891"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/742071"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=807762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=807762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=807762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Threat to skilled workers <\/h2>\n\n\n\n
Rival steelmakers <\/h2>\n\n\n\n
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