Steel producer ArcelorMittal South Africa’s (AMSA’s) purported petition to government for R3.1-billion to bail out its struggling long-steel operations would be a waste of money, unless accompanied by significant policy changes, including an overhaul of the controversial price preferential system (PPS) and export tax on scrap metal.

This is the view of International Steel Fabricators executive chairperson Neels van Niekerk, who points to significant overcapacity in the longs market, which would have to be rationalised for the market to become sustainable.

Speaking during a recent Mining Equipment Manufacturers of South Africa event, Van Niekerk criticised both the Steel Master Plan and the scrap policy, and even questioned whether either of the interventions were compliant with South Africa’s competition legislation.

“It's an oligopoly created by government . . . Here, we are allowing a group of people with the biggest investor – the government – to totally control a system of procurement,” he said.

The PPS and scrap export tax had reduced the price paid by the mini-mills for their raw material to a point where AMSA said its integrated Newcastle mill had been placed at a competitive disadvantage.

It has, thus, decided to wind down the KwaZulu-Natal facility and place it into care and maintenance, along with its longs operations in Gauteng and Mpumalanga.

To offset this disadvantage, Van Niekerk said AMSA had asked for higher import tariffs of up to 25%, which downstream fabricators and traders strongly opposed.

Independent economist JP Landman cautioned, however, that scrapping of both the PPS and export ban, while imposing higher import tariffs, could further undermine economic growth.

“Putting tariffs on imports is not an industrial policy. That is trying to hide from the realities of the world,” Landman said at the same event.

Instead he believed the solution lay in “thinking out of the box”, even musing that it might be better for the Chinese investors that were considering a new steel mill in Limpopo to rather be given an opportunity to take over the facilities that AMSA was winding down.

“I believe in the ingenuity of the South African people. We are really good at tackling problems and solving them when we work together,” Landman said.

He acknowledged that South Africa’s industrial policies had failed to drive industrialisation, but noted that policy reforms could spell hope, citing President Cyril Ramaphosa’s promise of modernised and comprehensive industrial policy focused on localisation, diversification and decarbonisation.

There was also some hope for the steel sector should the long-awaited economic recovery begin to take shape.

"If our economy grows at 1.8% . . . we've got a chance for the first time in 11 years to make more money than babies, because our population growth is 1.33%.

“If these numbers hold until the end of the year, and if they can be sustained in 2026 and 2027, which is what is assumed in the Budget, then there will be some relief for [the steel] industry.

“There will be relief for everybody, but the steel industry is particularly sensitive to economic growth,” Landman said.

IMPACT OF US RELATIONS

He was concerned, though, about the potential economic fallout that could result from the deterioration in South Africa’s relations with the giant US economy, given President Donald Trump’s unfavourable attitude towards South Africa.

Trump has been highly critical of the African National Congress’s (ANC’s) promulgation of the Expropriation Act, and signed an executive order, EO 14204, under which the US will consider “refugee resettlement for disfavoured ethnic minority Afrikaners facing unjust racial discrimination in South Africa".

It could also place South Africa’s favourable trade access under the African Growth and Opportunities Act in jeopardy, as the protection of property rights is a fundamental qualifying factor.

Emerging policy positions in the US have already had a direct financial impact on South Africa, following the withdrawal of aid previously extended to South Africa under the President's Emergency Plan for AIDS Relief and under the Just Energy Transition Partnership.

Conflicting policy positions between the two countries were also evident in US Secretary of State Marco Rubio decision not to attend the G20 Foreign Ministers’ Meeting in Johannesburg in February, taking issue with South Africa’s G20 theme of ‘Solidarity, Equality, Sustainability’.

Tensions escalated in March, after South African ambassador to the US Ebrahim Rasool made injudicious statements about Trump leading a global “white supremacist” movement, which led him to be declared persona non grata and given 72 hours to leave the US.

“Trump will do more … Will that detract from growth? Yes, it will. Will he put tariffs on us? Will that detract from growth? Yes, it will,” Landman said.