Meeting with Minister Ebrahim Patel

Steel Master Plan

20 July 2019

 

Preamble

The Minister gave about an hour of introduction and background and then opened the floor to comments and commitments from the audience.  There were more that one hundred people from all levels of the steel sector attending, from mills, to foundries, manufacturers, fabricators, association, labour and other government offices.

Opening address from Minister Ebrahim Patel, dti

During the past few weeks the dti have held meetings with Labour, Business and other interested parties to a common purpose.  This meeting of the Steel Sector has been called to develop a master plan for the steel industry through dialogue. The steel sector is facing immediate challenges and if we navigate these challenges well, we can remedy and grow the industry.

The steel value chain is the bedrock of any country’s economy, it is a significant employer and a great example of downstream beneficiation.  The current problem is that globally production exceeds demand.  On the domestic front there are issues of electricity cost, labour market inflexibility and many other concerns.

The proposition is that we need a clear vision in the industry and a growth plan.  This needs to be coordinated by pushing all stakeholders in a positive direction.

On the 1st of July 2020 the Africa Continental Free Trade Agreement (AfCFTA) starts to reduce tariffs and this will result in huge logistical infrastructure spending across the continent. Already R100bn of seed funding has been approved by the South African Cabinet for this purpose in South Africa.

What the dti are proposing here is like a braai. Government can’t do everything to solve the problems in the sector but all must come to the party.  If we look at it as government lights the fire for the braai, the other participants in the sector must also come to the party so that it is all inclusive. They must bring the sausages, steak, drinks etc. and then everyone in the sector can enjoy the party together.    The minister said that he did not want this to be a cathartic session where everyone airs their grievances and walks away being cleansed to some extent. This must look at the needs of the sector and what industry are going to put into the party to assist and help solve the issues.  The master plan is what each brings and needs with reasonable, achievable time frames.

As the minister sees it there are two main issues that need to be addressed:

  1. The competitive challenges in the industry, both locally and internationally;
  2. Transformation, bringing young people into the industry and broadening the base of skills in the economy. An empowerment model within the business make the stakeholders increase their commitment to the business.

Some things that the dti are already working on:

  • Reconstituting the ITAC Steel Committee;
  • They have developed a three year funding pool of R210 million to assist manufacturers and fabricators in the industry. The dti are asking government for that to be doubled;
  • IDC has R1.5 billion to assist the sector and rules for applying for such funding have been changed for easier access;
  • The minister is currently discussing with his colleagues, Pravin Gordhan and Gwede Mantashe, a sensible electricity pricing scheme and reliability of supply;
  • The dti are also looking a logistics pricing issues and bottle necks;
  • The dti are in discussion with the US on Section 232 and AGOA.

It was stated that what we need to come out of the discussion are a few actions that are do-able and achievable.

The Way Forward

  • All contributions are helpful;
  • We need to set up industry committees to look at opportunities that are offered from the AfCFTA;
  • The dti are also looking at focussed SEZ’s;
  • There will be a new focus on exports. Recently the dti have been taking small companies on OSM’s to try and support BEE. This has not worked as these small companies are out of their depth and achieve nothing. Our new focus will be on flagship companies and associations.

During the next two weeks the dti requested that the attendees do some homework and provide a short input on solutions/needs and how the dti can assist (maximum 2 pages). It must contain do-able things that are realistic.  “Let’s look at quick wins, implement and publish.”

Comments, suggestions and assistance from the delegates

  • We should reduce the duties on all steel imports to lower input costs;
  • We must stop overseas companies coming into SA and using non-South Africa locals and materials for projects. They compete against the local fabricators and their lower costs cost us jobs/tenders;
  • Downstream industry is being severely threatened by cheap imports coming into the country. The downstream industry creates a lot of jobs and if the current situation continues, they will be forced to close down;
  • Columbus Stainless want to compete with the pricing of imported raw materials so if people feel that their prices are too high, they should contact Columbus directly. They are looking for new markets in Africa but find that there is very little knowledge of processing stainless steel and therefore selling the raw product is difficult.  They developed the local market from a base of some 10 000 tonnes per annum up to 120 000 tonnes per annum. This has recently dropped below 100 000 tonnes per annum. Sassda used to identify projects and pass them on to Columbus – such as information from Sasol and SAB for example, but this no longer happens. They see no value in trade shows but would like to work with dti on any projects, local or otherwise, that they identify;
  • We must increase our exports, so we need our borders/harbours etc. to work efficiently and we need assistance from dti in influencing our neighbours to do likewise and do business with us;
  • We need to incentivise local manufactures and overseas OEM’s to setup manufacturing in South Africa. Seifsa also pledged their expertise in assisting the dti with this project;
  • SARS must scrap the secrecy about the names of those companies that are importing and exporting as we need greater transparency. We can then see exactly what is going on and identify problems;
  • The IDC have introduced two new schemes to assist the steel sector: The downstream metals development scheme, and the Feasibility Scheme – this can assess the viability of project on the continent before companies commit. 

Some comments

  • There were a lot of complaints and comments about the Arcelor Mittal pricing structure, but as one delegate pointed out, if AMSA did not exist our ports and harbours could not cope with the volume of imports that would be required;
  • Several delegates, amongst them Seifsa and Scaw Metals, offered experts to assist ITAC and SARS identify any avoidance issue in the case of imports into SA and offered to pay for these experts;
  • The morning after the event we received an email of thanks from Minister Ebrahim Patel and an email address for submissions;
  • We also received an email from Solidarity pledging their commitment to our efforts.