The following article was written by Lucio Trentini, CEO of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA). This is Part 2 of a two-part series.
The South African steel industry is eager to collaborate with government. Freepik
The key question industry will be reflecting on, and proposing solutions to, is how the industry can improve the cost structures across the value chain to position South African primary steel making in the lowest quartile of the global steel cost curve, increase downstream value addition to claw-back on the local market share and increase value-added exports. Before answering this question, some critical considerations have to be taken into consideration:
- adopting a strategic approach and balance to investment between blast furnace and mini-mill capacity
- levelling of the playing field with respect to incentives e.g. scrap metal, iron ore, etc.
- incentives and support for foundries
- the role of international trade instruments and greater protection for the value chain.
- the critical role of designation for state procurement
- the alignment between policy instruments for strategic procurement, financing and public-private partnerships
- the provisions in competition law that allow companies to collaborate meaningfully to create structures where projects can be supplied by the entire value chain, from primary products to finished manufactured products, all working together
Industry is in the process of drafting further input for consideration in framing the immediate, medium and long-term interventions to directly address the challenges raised in the problem areas.
However, in the immediate term, we propose that there are interventions that the government and in turn the DTIC, in being the final arbiter on formulating a balanced metals/steel and engineering industrial strategy can act on in contributing to arresting the decline faced by the sector, these areas include:
- act on imports through trade instruments – particularly where there are pressure points building (which is across the value chain)
- procurement practices, with an emphasis and preference for local where competitive capacity exists and act on transgressing state organs
- scrap vs. commodities policy (iron ore, chrome, manganese, coke) requires urgent attention and resolution
- intervention in logistics costs
- Operation Vulindlela to coordinate and consolidate national demand of steel related projects
It is time for government to take the lead and workcollaboratively with the sector and craft a balanced, forward looking steel strategy that protects all players in the sector, ensuring a competitive industry that aligns with global trends.
The South African steel industry is eager to collaborate with government to ensure that policy decisions are made in the best interests of the industry and the nation. 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.
