Johannesburg, 11 October 2019, The continuous influx of imported steel into the domestic economy remains a great concern for companies operating in the metals and engineering sector, so said Steel and Engineering Industries Federation of Southern Africa (SEIFSA) President Elias Monage.
Speaking at the SEIFSA Presidential Breakfast held in Johannesburg this morning, Mr Monage said inspite of a relative reduction in import volumes, owing to the protection measures for the upstream steel industry announced by the Government, import penetration – notwithstanding designated products – remains a cause for concern.
He said there are also legitimate concerns from the mid-and downstream steel sectors that the safeguard duty mainly favours the upstream still sector.
“This calls for a need to revisit quid pro quo commitments made by the principal beneficiaries of the safeguard, including the contentious downstream developmental pricing, which is obsolete in a world of volatile steel prices, exchange rate and trade war,” Mr Monage said.
Although the establishment, through interest rate subsidy, of a R1.5 billion downstream steel industry competitiveness fund over three years has relieved some pressure from a number of structural factors, Mr Monage said there is still a need to ensure that the fund is accessible to more companies.
“Longer-term survival and recovery, however, needs honest and sincere discussions around policy measures and company behaviour. The need to contain input costs and further lessen the impact of both the 2007/8 financial and economic crises and the 2014 productions crisis still exists. Also, the negative effects of the Chinese economy, which is simultaneously slowing down and overwhelming world markets with cheap exports, need to be contained.”
He said there are, however, prospects for increased trade and interdependence with the rest of Africa, since local companies can still make use of the R13,4 billion export trade facility launched by the Export Credit Insurance Corporation of South Africa (ECIC) and the African Export Import Bank (Afreximbank).
“This amount, plus additional support to the tune of $1 billion from Afreximbank to help alleviate the transactional and adaptation costs of countries which are signatories to the African Continental Free Trade Agreement, should boost SA’s intra-African exports to the rest of Africa.”
Remarking on transformation, Mr Monage said the slow pace of transformation in the metals and engineering sector continues to be of great concern. According to the Employment Equity Report 2018 released by Former Labour Minister Mildred Oliphant, white people occupy 67.7% of top management jobs in South Africa, while Black people occupy 83.5% of positions at unskilled level.
“The manufacturing industry in general and the metals and engineering sector in particular are very much in need of transformation. As a sector, we need to stand up and embrace change and advocate transformation. It is of critical importance that a concerted effort is made by the sector to create meaningful opportunities for all South Africans to play a crucial role in taking our industry to new heights.”
Delivering the keynote address, Deloitte Emerging Markets & Africa Managing Director Dr Martyn Davies said South Africa needs to implement structural reforms in order to address the challenges of low economic growth and inequality.
“Political rhetoric will not change South Africa’s economics and time is not on our side. We need to take drastic action now.”
He said the manufacturing sector remains vital in lowering the country’s inequality rate.
“Countries with high manufacturing value add has low levels of inequality because
manufacturing creates structural employment and create a need for services sector, which in turn also contribute towards economic growth.”
He said more capital should be invested in productive sectors of the economy.
“A lot of capital investment is being plugged into non-productive sectors such as the financial and real estate. More investment needs to be spent in productive sectors to create employment and lower inequality,” Dr Davies concluded.