The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) has expressed grave concern over ArcelorMittal South Africa’s (AMSA’s) decision to mothball its long-steel operations, describing the move as a “socioeconomic catastrophe” with widespread ramifications for the economy, industry and communities.

SEIFSA president Elias Monage said in a statement on Friday that the closure of AMSA’s Newcastle and Vereeniging works, along with its AMRAS subsidiary, would lead to severe job losses and ripple effects across the economy.

“Some of the most alarming estimates over and above the reported 3 500 direct jobs on the line are the medium-term impact of second round effects in the order of 20 000 to 25 000 jobs and in the longer-term multiples of more than this. The effect of this latest development will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining sub-sector of the economy and all who work in it,” he said.

The development presents a significant setback to the base of the industrial sector and South Africa’s broader industrialisation goals.

Monage said it was apparent that the ambitious goals set by the Steel Master Plan (SMP) to charter a roadmap to re-energise the sector, expand production and increase demand across the steel and fabrication industry value chain and introduce an industrialisation programme had failed.

“The SMP was meant to deliver a comprehensive industrial policy framework, where a total, inclusive, industry perspective would be taken and complementarities across the value chain enhanced. Sadly, what we are witnessing is the opposite, wherein policy is implemented in a fragmented manner, with a short-term view and with pockets of industry being pit against one another,” Monage said.

He criticised government for failing to respond effectively to AMSA’s year-long plea for assistance.

“The fact of the matter is that [AMSA] never had a prayer. Sadly, we’ve seen this play out before with the closure and mothballing of Highveld Steel and Saldanha respectively, all at the feet of a dithering government too slow to react and offering too little too late,” Monage said.

The shutdown leaves South Africa with fewer players producing long-steel products, such as fencing material, reinforcing bars, beams, rails and profiles that are used in the construction, mining and manufacturing sectors.

Monage said that, ultimately, the AMSA downsizing highlights three key industrial-policy tenets.

“Firstly, if government lacks the capacity to do everything, then it should focus on its core functions – which in the economy means infrastructure, building human and social capacity and maintaining security.”

“Secondly, government’s role in industrial policy is to shape an enabling environment that aligns national and business interest. It is not to mediate short-term compromises between competing stakeholders.”

“Finally, industrial policy should be used to rescue struggling industries or companies, especially where the long-term socio-economic benefits outweigh the costs,” Monage said.

He said that the deindustrialisation trajectory observed in the sector could be attributed to a lack of a well-considered and all-encompassing metals sector industrial policy.

“A holistic approach that protects the diversity and sustainability of the entire steel value chain is essential for the future success of the South African steel industry,” said Monage.

A sectoral engagement between Trade, Industry and Competition Minister Parks Tau and the metals and engineering sector took place on November 20 last year. This meeting, a first formal engagement, with Tau sought to provide a platform wherein the Department of Trade, Industry and Competition and the steel industry could come together and develop a way forward to arrest the rapid decline in the sectors performance.

The key take-aways from this session included a universally recognised need or urgency.

“We are not operating in a business-as-usual scenario and, therefore, interventions need to be as radical and ambitious as deemed necessary under the circumstances. More of the same is likely to produce the same result, with negative consequences for labour, revenue collection and the long-term sustainability of the metals and engineering sector,” Monage said.

He said it was acknowledged at the sectoral engagement that the sector was on the edge of the point of no return and, therefore, without ambitious action, de-industrialisation would continue and accelerate.

“If [interventions are] delayed, it may become harder and more expensive to reverse,” Monage said.

SEIFSA, representing both the upstream and downstream value chains, once again called on government to urgently prioritise a long-term, inclusive strategy for the steel industry.

“A collaborative approach that considers all stakeholders in securing the future of South Africa’s steel industry and its critical role in economic development,” Monage said.

He described the closure of AMSA’s long-steel business represented a “profound policy failure”, but stressed that steel still held potential as a cornerstone of South Africa’s reindustrialisation efforts.

“What is now required on an urgent basis in the face of this crisis is leadership – a focused character and decisiveness – that . . . until now has been missing and without which we will be doomed to the same results, with negative consequences for the long-term sustainability of the metals and engineering sector,” Monage said.