A MUST READ: Darkening of the skies is ANC’s chickens coming home to roost

A MUST READ

Darkening of the skies is ANC’s chickens coming home to roost

by Peter Bruce

First published in BusinessDay on 3 April 2025

Through hubris and neglect President Cyril Ramaphosa has allowed the steel industry to wither into multiple crises.

I once had a colleague on the Financial Times who caused great hilarity in the opening piece to the newspaper’s Italian Banking & Finance supplement, published around 1983. “The skies over Rome,” he began, “are darkening with the wings of economic chickens coming home to roost.” 

The amusement was at the sheer extravagance of the cliché, but it’s the first thing that springs to mind about SA now. We cannot, surely, expect to get away scot-free with a governing party in the ANC that, with every crisis it faces, makes things worse, not better.

It seems almost incurably addicted to bad policy, distrust in markets and enterprise, and a genuine and deep ignorance of the content and value of economic growth. Author RW Johnson once said SA “can either choose to have an ANC government or it can have a modern industrial economy. It cannot have both.” 

He was 100% right, and the record of the past 15 years at least shows it. The spectacular start on Wednesday to the unravelling of the government of national unity (GNU) was triggered purely by the ANC’s inability to take seriously the primacy of the case for growth.

But the big political tragedy masked a potentially more insidious industrial catastrophe in the grinding, slow-motion, entirely predictable and almost inevitable loss to the country of the capacity to make steel from its own iron ore. 

Typically, the ANC marked the moment. ArcelorMittal SA (Amsa), the only integrated steelmaker in the country, announced it was not, after all, going to close its long products — rods, bars, pipes — integrated works and business at Newcastle in KwaZulu-Natal.

Instead government, through the Industrial Development Corporation (IDC), would loan Amsa nearly R2bn to keep Newcastle open. In addition, Amsa secured a R1bn Temporary Employer/Employee Relief Scheme (Ters) grant to pay, for a full year, the salaries of the 3,500 staff affected by its earlier announcement to shutter Newcastle. 

It’s a full-on rescue attempt. Amsa is so pessimistic about its long products business in SA that it said in a statement earlier in the week that “the intervention by government and the IDC will assist in keeping the longs business operational while a viable sustainable long-term solution is being sought”.

It clearly doesn’t think it is viable at all. Announcing the Newcastle closure in February (and late last year, and late in 2023 as well; this is an investor in a hurry to leave) Amsa said “the longs business will only continue to operate with financial support as the company does not have the ability to bear any further financial risk associated with the continued operations of that business”.

Even as it negotiates terms to stay open a while longer, it is also demanding that the state rein in its regulatory support for the ANC’s big “black industrialist” dream, which has dozens of smaller “mini-mills” that melt scrap and make steel wire and bars, and foundry businesses now sucking for money at the IDC teat while making life difficult for Amsa, at Newcastle in particular.

It says in this week’s statement that the government would use the extra six months not only to look for a buyer for the long products business but would also “expeditiously address” the structural problems previously identified by the company (that is, the state’s help to the mini-mills) ... to put the longs business on a sustainable footing. 

That “expeditious” would be news to the mini-mills, many of which are under water despite the IDC having spent at least R14bn keeping them afloat at former trade, industry & competition minister Ebrahim Patel’s insistence. They expect still more help, but who knows now if they’ll get it. Perhaps they’ll all end up running Newcastle. Or, if the government has any imagination it might require Amsa to literally scrap Newcastle so it can be cut up and melted down into free steel for the mini-mills for the next 10 years.

Closing long products leaves Amsa with its slightly more successful flat products business at Vanderbijlpark, but even that is not safe from the mini-mills. For a start, Scaw Metals recently installed new technology to enable it to continuously cast melted scrap into slabs, which it can then roll flat. 

Amsa here (the old Iscor) is history; the market for steel in SA is simply not robust enough to sustain it. And the government doesn’t have the money to sustain it either. Through hubris and neglect, President Cyril Ramaphosa has allowed the steel industry here to wither into multiple crises.

The only thing that would comprehensively save the steel industry in SA is demand, but the ANC and its leader have been so slow to trigger a vibrant increase in infrastructure spend that the moment is now possibly lost. The advent of a Donald Trump administration in the US will do the rest. 

First, Trump’s tariffs on imports of steel into the US will create a historic surplus of the metal on the world’s market. Even before his election there was a huge glut of steel created by the Chinese construction market collapsing. The US imported a near-record 40-million tonnes of steel last year. 

Second, his trade policies are going to slow down US growth and add to an already softening global economy. SA won’t escape. While some of Ramaphosa’s reforms promise large construction projects, it is difficult for local suppliers to gear up to make steel or cement based on what are so far mere promises. 

Trump aside, a decision by the department of trade, industry & competition that its trade regulator, the International Trade Administration Commission (Itac), should conduct a review of the tariffs on about 600 steel products will cause a blanket increase in steel import tariffs and increases to the prices of steel to the public. Its deadline is July, a stretch for an organisation that struggles to conduct just one product review inside 27 weeks.

Higher prices will further depress the very same weak domestic market Amsa complained about when it decided to close Newcastle. The ANC has for years been doing all it can to make manufacturing in SA as difficult as possible by controlling its every feature. Now a steel collapse alongside huge protective tariffs will finish the job. Get ready for the great roosting. 

Issued by Peter Bruce,  a former editor of Business Day and the Financial Mail.

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