Call for intervention in the steel industry

Moral suasion is not sufficient to force the steel industry to follow a price policy that boosts competitiveness and the development of downstream industries, a senior trade and industry official told MPs on Wednesday.

Nimrod Zalk, the deputy director general of industrial development at the Department of Trade and Industry (DTI), said the recent pricing tug-of-war between ArcelorMittal South Africa and Kumba Iron Ore had underlined the need for enforceable mechanisms to ensure a competitive steel price.

He said an interdepartmental task team that will shortly complete its work had spent more than enough time explaining the need for an alternative pricing policy to the industry.

“It cannot be the case that a developmental steel price has not been implemented because of a lack of understanding of what that means. That certainly cannot be the case,” Zalk told Parliament’s portfolio committee on trade and industry.

“Obviously, part of the mandate of the task team is that whatever mechanisms, policy tools are put in place, these need to be enforceable.

“If we have learned one thing from this episode, it is that clearly moral suasion is not sufficient. We have attempted that over a very long period of time and that has not been sufficient.”

Call to expedite
Zalk said Trade and Industry Minister Rob Davies had asked the task team to expedite its work, and it was expected that the process would be completed within two months.

“Our minister has instructed us to try to expedite this work as rapidly as possible.
And I certainly don’t believe we are talking about a year down the line, I think we are talking about a month, six weeks, maybe two months down the line.”

ANC MP Sisa Njikelana said it was his impression the time had come to regulate a recalcitrant industry.

“Can DTI explore regulation, full or partial, on this matter? I know that a number of people would cringe as to the term regulation. But I am very emphatic on that—let DTI explore because of our de-industrialisation in this country.”

He said the negative side-effects of current steel-pricing arrangements were in effect “the consequences of privatisation” and accused ArcelorMittal of undermining, through its stance, the state’s efforts to foster re-industrialisation.

Without responding to the call, Zalk said the downstream steel sector should be reaping some of the benefits of base-metal pricing arrangements.

“Because steel itself makes up such a significant proportion of the cost of steel fabrication, the steel pricing is a fundamental factor in the competitiveness, profitability and viability of the downstream part of the value chain.”—Sapa

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