SA steel industry on the brink of collapse
The first job losses in the steel industry will come in two waves. The first wave is here, and crisis talks continue between labour, business and government. At least 10 000 people will lose their jobs in the next six months, but 190 000 workers are at risk.
The second wave will come in the next month or so.
The steel industry is near collapse, thanks to a vortex of economic crises, including little protection for the local industry and dumping from China, as well as a slowdown in demand, both domestically and internationally.
Two weeks ago, unions, faced with an onslaught of notices to retrench from steel companies, formed a task team with business to try to save the industry. They met government last week, and a range of interventions was agreed to.
In the short term, all unions can do is try to minimise the damage. That there will be damage is now inevitable.
At least 20 companies are retrenching. Scores more workers are working shorter work weeks.
Many Evraz Highveld Steel workers are currently voting on whether they want to take up a training layoff levy scheme option or retrenchment packages.
ArcelorMittal South Africa temporarily retracted its retrenchment notices to see whether there is an improvement in the next six weeks. More companies are in business rescue.
Steve Nhlapo, head of collective bargaining at the National Union of Metalworkers of South Africa, says that, even after the task team meeting, employers have said it is too late to stop the retrenchments.
“They don’t foresee any changes in the next six months,” he says.
This week, Nhlapo was visiting Tata Steel plant in Richards Bay. Tata Steel is in business rescue, and Nhlapo was meeting management, business rescue practitioners and workers to assess the situation.
Retrenchments at that plant were not on the table, yet.
Marius Croucamp, metal and engineering head at union Solidarity, says it is hard to promise workers anything.
“Certainly, they would welcome the outcome of the task team but their reality is the retrenchments that are on the go,” he says.
The task team’s meeting is really about macro-factors, he adds. And, even to that end, government hasn’t really committed to introducing 10% import tariffs.
“They said, if you want tariffs, put in your applications and we’ll see what we can do,” Croucamp said. “But they said they won’t fast-track the process because they’ll open up themselves to potential litigation.”
Croucamp says the fact that employers agreed to an end to parity pricing shows “they are desperate”.
“We are not just talking about saving jobs here; we are talking about saving an industry.”
Solidarity says it is dealing with retrenchment processes that are already in motion at 26 companies, related to the primary steel industry.
But lurking in the background are 75 companies where workers are working less time or shorter workweeks as demand grows ever slower. Five companies have already started laying off workers who are only called in to work when orders arrive.
The second round of retrenchments will probably start in September. “These are not just companies who want to lower their head counts. This is the closure of entire plants,” Croucamp said.
Jan Theron, co-ordinator of the labour and enterprise policy research group at the University of Cape Town, says retrenchments are always the most difficult thing to stop.
He says the collapse of the steel industry will also mean the end of government’s industrialisation programme.
“The writing has been on the wall for some time,” he says, “but a political culture of short-termism has meant that government took too long to intervene,” Theron said. “It is quite extraordinary that government has not intervened in something which is so important to the industrialisation project.”
Henk Langenhoven, chief economist of the Steel and Engineering Industries Federation of Southern Africa, says the battle has been lost in the short term.
“We might not lose the entire industry, but we will lose parts of it in the next six months,” he says. “My suspicion is that we will easily lose 10 000 jobs or more. The guys are sitting on massive inventories [of steel] that they can’t sell, because there is no demand.”
Peter Major, mining analyst at Cadiz Corporate Solutions, says the steel industry’s situation is “apocalyptic”. He quickly adds: “If you say it’s anything less than apocalyptic, nobody takes it seriously.”
Major says it is unlikely that jobs can be saved at this late stage.
“If you’ve been ingrained in a bad habit for 20 years, are you likely to change your ways after one meeting?”
Nhlapo says that, even if a 10% import tariff is introduced, Chinese steel remains “as cheap as cabbage”. Hence the focus to stop Chinese dumping of steel.
Nhlapo says if government can plan better jobs can be saved.
“If we understand what projects government will be starting, we can start talking about what kind of steel they will use, and we can start training workers,” he said.
Theron says the global reality is important: work is not being created and the steel industry is not alone.
“Everybody would like to be employed full-time, but the reality is that they probably won’t be. That is a whole category of labour that is not covered by organised labour.
“Capitalism doesn’t create jobs, and it isn’t going to create them in South Africa. So it’s time we realised that there aren’t going to be jobs for a long time to come, at least not by the definition that we are used to,” said Theron. “At some point somebody has got to break the news.”
This, too, will pass, says Patel
The minister of economic development, Ebrahim Patel, told the Mail & Guardian this week that the government was working “under the radar” to respond to crises in the steel industry.
He said that while government could not control what happened in China, it could control some things. For example, he said it had introduced some localisation requirements for government. Five local factories were now assembling bus rapid transit system buses. And one major steel- maker that had closed down was about to reopen because government had facilitated finding it a new partner in Turkey.
Steel pricing issues were being addressed, and the competition authorities had investigated price fixing in the industry.
Patel said he had also given a directive that had resulted in an “encouraging” decrease in scrap metal exports. He had also told steel companies they needed to apply for anti-dumping duties to be put in place.
Another steel company received “public industrial funds” to keep it afloat, and applications for trade remedies were being expedited, he said.
Patel said that avoiding massive job losses depended on a number of factors, and government could not control all of these. But it could “steer local demand better”, he said.