Mr Langenhoven said that while the country’s priority needed to be to grow the economy by ensuring that South Africa was more competitive internationally and attractive as an investment destination, it was to be welcomed that the Government appears to have come to the realisation that it needed to impose the import tariff to give local manufacturers a chance to enhance their ability to compete and to save jobs albeit in the long-term.
“The basic steel producers are in such distress that short-term downscaling is unavoidable. Gearing ratios for basic steel producers worldwide have shot up since 2010, and South Africa is no exception. Several of the companies have stated that they cannot service their debt at the lower scale of production, they are simply not profitable, and cost cutting is inevitable in the short-term,” Mr Langenhoven said.
He added that production costs in South Africa, for various reasons, were higher than the lowest cost quantile of Chinese producers. The domestic market for steel has contracted due to construction and mining activity slowing down. The auto sector in the country is faring better due to exports to the US, primarily, but other steel exports (up to 50% of production) are suffering due to depressed world markets.
“Protection, in this scenario, is a choice between losing the entire sector, as we have seen happening in Australia or trying to ‘ride the short-term storm’ and adjust for the future,” Mr Langenhoven said.
The Minister of Trade and Industry’s decision to impose tariffs comes a week after a watershed meeting took place between labour, business and government behind closed doors in Pretoria.
The meeting, which was a shared initiative of labour and business was an attempt to put the brakes on the looming job loss bloodbath in the primary steel and related industries.