Steel Master Plan

The South African stainless steel sector is currently experiencing one of the fiercest economic storms it has ever faced; made even more challenging by the COVID-19 pandemic and South Africa’s hard lockdown.

Evidence of the effect of this onslaught was the downgraded sentiment in Sassda‘s monthly Short Track Survey in April 2020. This index measures the industry’s outlook on various aspects of its operation, efficiency, and general sentiment. The survey’s overall Expectation Index dropped to its lowest level since its inception, in the middle of one of the most stringent lockdowns in the world. Fortunately, once the industry lockdown began to ease, and the industry was allowed to reopen, the latest survey May 2020 revealed a rebound with an increase in expectations. The hope is that this will continue as economic activities resume. A critical initiative which could allow this to happen is the Steel Master Plan initiated by the Department of Trade Industry & Competition (dtic) in July 2019. Given that one of Sassda’s key mandates is to serve as the official voice of the stainless steel industry; the association has worked tirelessly with the dtic on the plan. This work aims to alleviate the pressures the South African stainless steel sector currently faces by stimulating local demand, championing local procurement, and reducing the import of finished products, where domestic supply exists.

To achieve these goals, Sassda has identified value chain sector opportunities that have the potential to broaden the industry’s skill base and foster an empowered business model for sector stakeholders committed to economic growth in South Africa.

TARIFF OVERHAUL

The dtic has instituted key interventions. These include key trade support measures:

• An increase in the general rate of customs duty on primary steel products to 10%
• Safeguard measures on hot rolled coil and plate products
• Tariff increases on a range of downstream products to the maximum bound rates allowed
• Trade remedies such as the Africa Continental Free Trade Area
• Rebates where products are not manufactured locally or additional value-added, before export
• SARS has introduced a reference price system for steel products to address low priced imports and illegal trade

New measures for government procurement will also see benefits in the use of locally produced primary steel. Steel-intensive products will be designated under PPPFA Rail Infrastructure; Rail Rolling Stock; Steel Products; Powerlines; Pipes and Pipe Fittings; Valves; Pumps and Vessels.

In the second half of 2019, the Steel Master Plan saw additional measures implemented including:

• Amendments to the Steel Fund criteria to improve accessibility and reduce the cost of lending
• Additional designations approved by the National Treasury in January 2020 to support the job intensive downstream sectors
• An export tax on scrap metal to be amended by September 2020

REVIVING LOCAL SECTORS

Amidst the current stringent efforts to restart the economy the Steel Master Plan aims to develop local capabilities and create regional competitiveness. Sassda Market Intelligence and Exports Manager Lesley Squires reports: “Trade in finished goods is a vital focus of the plan as it is central to real opportunity growth for the country. This stimulus effect would be achieved via import replacement and export promotion, to provide substantial volume in value added steel imports and export trade.”

To achieve this, three specific areas have been identified by Sassda as presenting excellent local growth potential, namely the Hollowware Sector and two key product markets as that of Gas Cylinders and Beer Kegs.

• Within the Hollowware Sector, finished imports currently average at around 10,000 tons per annum, with capability for all products to be locally manufactured.
• All the gas cylinders used in South Africa are currently imported, yet the local stainless steel industry can manufacture these locally. While initial manufacturing levels would only meet a portion of the total imports (currently in carbon steel) research has identified the potential for their use within the leisure market and the medical and hospitality industries.
• Similarly, 100% of the beer kegs used in South Africa are currently imported, but once again, the local industry can manufacture stainless steel beer kegs.

Squires reports that in line with the above, Sassda has submitted proposals on three identified projects to the Steel Master Plan team and once approved, is ready to move forward with the pilot project rollouts. She adds: “By empowering the development of the stainless steel conversion ector, the Steel Master Plan will engender local competitiveness on the continent. As a vital conduit between government and the local stainless steel industry, Sassda is committed to boosting businesses on the continent within the broader scope of the dtic’s Steel Master Plan.”

For more information on Sassda’s work on the Steel Master Plan click here: https://sassda.co.za/master-steel-plan/ or if you’d like to submit constructive feedback or ideas for Sassda’s ongoing communication with the dtic, please email: lesley@sassda.co.za