Johannesburg, 21 September 2018 – Lack of demand in the form of large infrastructure projects, expensive input costs, lack of skills required by the metals and engineering (M&E) sector as well as policy uncertainty, low economic growth, low returns on existing investment and a saturated domestic market are some of the factors identified as constraining investment in South Africa’s M&E sector.
Speaking at the Metals and Engineering Indaba taking place at the IDC Conference Centre, Southern African Institute of Steel Construction CEO Paolo Trinchero said other factors identified as barriers to investing in the sector include lack of trust between government, business and labour, lack of collaboration in pursing sustainable industry solutions and lack of innovation.
Echoing Mr Trinchero’s sentiments, Steel and Engineering Industries Federation of Southern Africa Chief Economist Michael Ade said there has, over the last decade, been a lack of both green and brown fields investment into the sector owing to low demand, among other factors.
He said, as a result, domestic producers were under pressure to shed jobs, which in turn lead to low productivity in the sector – this created a negative vicious cycle, which is bad for the economy.
However, there was hope that working in collaboration, and working with the countries’ young people, South African companies could find solutions to the challenges they face.
“There is definitely great potential in a huge pool of young, enthusiastic young people that can be trained and enabled to contribute towards our sector. There is also a need to enhance partnerships and collaborations between companies so that they approach these challenges as a collective. Industry needs to stop working in silos and work together in seeking solutions required to address constraints to investing in our sector,” Mr Trinchero said.
According to Dr Ade, interventions required to address challenges facing the sector include increasing aggregate domestic demand by committing to supporting designation and local procurement; reconsidering administered prices to put money back into the pockets of consumers, pursuing import substitution by actively promoting collaboration between producers across all value chains to enhance in-country value addition, improving port efficiency and considering re-instating rail subsidies for export competitiveness through implementation of export incentives.
Meanwhile, International Finance Corporation (IFC) Senior Investment Officer Paul Mukasa said the IFC, which had a long track record of providing long-term investment in the metals sector had invested billons in the sector in more than 50 countries across the globe.
He said when considering investing in a country, the IFC focused on reliable access to energy; the sector’s global competitiveness, energy efficient producers and best practice.
ArcelorMittal South Africa General Manager for Africa Overland Alph Ngapo said South Africa was yet to take full advantage of growth opportunities presented by the rest of the African continent. He said South African companies needed to specifically focus on East and West Africa as well as the SADC region where hundreds of billions in infrastructure projects will be spent.
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