Navigating the impact of government decisions on South Africa's steel sector

GOVERNMENT policies are an attempt to change how the market behaves (importing too much? Let's impose an import duty).

- DONALD MACKAY

When government, in 2012, decided to move money from packaging companies, car makers, and steel fabricators to the mini-mills (companies making steel out of scrap metal), by way of the Price Preference System (PPS), and then later friendly Industrial Development Corporation finance and export duties, they made the steel from mini-mills cheaper relative to both imports and steel from ArcelorMittal South Africa (Amsa).

That is what economists call a trade-off and every policy decision has one, whether taken deliberately or not. Policies, by their nature, shift resources from one part of the economy (manufacturers, scrap recyclers, waste pickers, Amsa) to another part of the economy (mini-mills). This was the intention, but the assumption seems to be that shifting those resources would come at no cost. Wrong.

At the end of November 2023, Amsa announced that they were looking at closing their longs business in Newcastle, identifying the scrap metal policies as one of the reasons for the closure. Lots of meetings happened between Amsa and government for about a year.

There was panic but the steel policies remained as they were. We saw some action on the anti-dumping and safeguard front, but mostly meh.