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AMSA: TO THE CONTRARY MINISTER DAVIES …

This is a response to the unprecedented attack by the Minister of Trade and Industry on the author hereof – click here to read. The purpose of this response, however, is not to defend the author, but to defend the Steel downstream against the protectionist measures hostile to it.

According to the Minister, the author has positioned himself as a ‘tribune’ of the downstream Industry. The Minister is, however, entirely wrong in making this assumption. NEASA, who represents employers in all Industries, is in fact also the largest employer body in the Steel Industry, also representing a ‘Steel Lobby’ comprising over 2300 businesses. The author speaks on their behalf and the Minister should be aware of this.

The Minister complains about the ‘aggression’ with which the author attacked the Department of Trade and Industry, stating that it does no service to the cause of the author. The Minister’s attention is drawn to the fact that the article which he responded to was written after the announcement of the introduction of the safeguard duties. By then the cause was pretty much lost – the dti had done what it set out to do. By then the author could not do any more damage. This notwithstanding, the author will continue to agitate for the liberation of the Steel Industry – on behalf of his constituency.

With regard to the introduction of the initial customs duty and the recent safeguards, the Minister employs phrases like ‘mollycoddling’, ‘illicit collusion’ and ‘back-door conspiracy’. These are phrases that the author never used. What caused the Minister to use it?

On this topic however: the Minister did not respond to our question on how it came about that his views did a 180 degree about turn – and that after the meeting between Mr Lakshmi Mittal (owner of AMSA) and president Zuma. Prior to this meeting the Minister fiercely argued in favour of a developmental price for steel to allow the Steel downstream access to cost-effective raw material – as a prerequisite for growth in the Steel Industry.

The Minister even regularly criticised AMSA for their import pricing policy and even punished AMSA by taking away a 5 percent customs duty which existed at the time. Comparing this approach to the Minister’s current approach, it is indeed a 180 degree about turn. The question remains though: what caused it?

The Minister must also not be too surprised that business is highly sceptical of interventions where government is involved, even more so where smoke, indicative of a fire somewhere, is detected. And it is not as if government’s hands are entirely clean as far as these actions, referring to the phrases used by the Minister, are concerned.

The Minister accuses the author of having a political-ideological agenda, presenting himself as the ‘champion of business-at-large against overweening, unaccountable government decision-making’. It is interesting that the Minister comes to this conclusion. The author never made general claims of this nature, neither did he use these words; it’s all of the Minister’s making. Come to think of it, however, these descriptions may all be very appropriate.

The Minister does not agree with the author that the 22 percent duties will result in job losses. The question is, however: how can it not lead to job losses? If a company is forced to pay 22 percent duties on cheaper imported high-quality steel, making that company less competitive in an already uncompetitive environment, how can it not lead to job losses? How can the importing of goods, instead of manufacturing locally, not have an effect on jobs? Also, how can the closing of factories in South Africa, and the opening thereof in neighbouring countries, not have an effect on jobs?

As mitigation to the adverse effects of the duties, the Minister’s response is the protectionist measures for the downstream. He presents this as a complete solution notwithstanding being fully aware that these measures are not even remotely in place. It is our view that, even if these measures are eventually implemented, it will be cost inefficient and an administrative nightmare. However, should it have been in place before the introduction of the latest duties, it would at least have shown understanding for the needs of the downstream.

It is the Minister’s view that South Africa simply does not have the capacity to import. Is this really the case, or is it merely the spin to justify duties? When AMSA’s mill broke down a few years ago, raw materials were imported for a couple of months. Our ports managed to handle it. Smaller companies which were not able to import, had access to imported high quality, low cost steel via larger trading companies. This event opened the eyes of many steel companies to what is really available.

In announcing the initial 10 percent customs duty in August 2015, the Minister stipulated the following conditions on which these duties were granted: there had to be no price increases on the products affected; there had to be price decreases on certain items; AMSA had to invest a substantial amount of money to upgrade its plant and there were to be no retrenchments. An undertaking was given that ITAC would immediately review the duties if the above-mentioned provisions were not met.

What happened though? Numerous price increases occurred and currently steel is nearly 40 percent more expensive; there were no price decreases; AMSA did not upgrade its plant; the ‘investment’ was used for the purposes of maintenance; R3.2 billion was taken out of the country and AMSA recently announced potential retrenchments. Instead of the duties being scrapped as a result of these defaults, AMSA somehow managed to convince government to introduce more duties – this time in the form of safeguards.

To compare South Africa to any other developed country when it comes to the issue of duties to protect primary steel producers, is simply disingenuous. The South African situation is unique in that we are burdened with a monopolistic, antiquated, old technology steel producer whose products often do not meet industry standards, whose delivery times are often subject to delays and which, in certain cases, does not even manufacture the products now subjected to safeguards.

The Minister refers to previous statements by the author as “throwaway censure”. Against the background of facts in this and the previous letter, it is clearly not. What is not helpful is the fact that the Minister is oversensitive to criticism. Within the context of our democracy, criticism is essential. The downstream does not approve of these protectionist measures and the author, representing a substantial portion of downstream businesses, not only has a constitutional right to criticise, but is morally obliged to do so.

 

This press release is by Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA).