Steel Industry: Patel is on the wrong track

STEEL INDUSTRY

PATEL IS ON THE WRONG TRACK

by Gerhard Papenfus

Dear Steel Industry employer

In a very recent report by the Centre for Development and Enterprise (CDE), “The Siren Song of Localisation”, they point out that Government policy with regards to localisation via duties, master plans, etc., should be called for what it is: “… an anti-export strategy, one that will only further constrain our future development.”

This balanced report (click here to access) scientifically argues why our Department of Trade, Industry and Competition (DTIC) is on the wrong track. Relying, among others, on World Bank data, the report shows that, contrary to Government’s claim that South Africa has an “over-propensity” to import, South Africa is not a significant importer compared to many other world economies.

According to the report, the significance of healthy imports actually correlates with economic growth, since the importation of raw material and components increases when a manufacturing industry is growing.

With regards to the Steel Industry, which is specifically mentioned, the report argues that the duties are in fact a measure to stop the importation of cost-effective raw material, which in turn leads to uncompetitiveness. An uncompetitive industry will not grow its exports which is the key to the growth of any sector. The Steel Master Plan envisages localisation by forcing Government and State-Owned Enterprises (SOEs) to buy locally produced steel. This, the report rightfully argues, is none other than a form of tax, since the broader public now has to pay more for electricity, roads and a host of other infrastructure-related products.

The report rightfully points out that, with its policies, Government is supporting very inefficient firms with strong lobbying capabilities; the benefits are concentrated in small pockets of vested interests at the cost of the public at large.

Government should take note that NEASA and many other organisations have been lobbying for the removal of import duties. If Government is serious about its self-proclaimed policy to make doing business in South Africa easier, they should intervene at the DTIC, which is currently implementing the exact opposite.

Gerhard Papenfus is the Chief Executive of the National Employers’ Association of South Africa (NEASA).

For more information:
NEASA Media Department
media@neasa.co.za