SEIFSA and NUMSA conclude Historic Agreement in record time

After three formal engagements SEIFSA and NUMSA have concluded the terms of a historic three-year wage agreement for the period 1 July 2024 to 30 June 2027.

Following a bruising round of wage negotiations in 2021 which peaked in a three-week strike costing the industry in excess of R600 million rand per day in lost revenue, this year’s agreement was reached in record time, with no industry disruption and within mandate.

The SEIFSA affiliated membership which accounts for 57% of all employees, employed by all the employer organizations on the bargaining council and NUMSA representing in excess of 115 000 members signed the agreement today at the Birchwood Conference Centre in Boksburg.

“This agreement is a testament to the commitment by the social partners to seek a settlement as soon as possible and with minimal disruption,” said Mr. Trentini.

The agreement was reached on the foundation laid by the signing of a process agreement by all the parties prior to the commencement of the negotiations – this strategic innovative approach was also in itself an unprecedented event.

‘’The process agreement set the road-map to settlement, a pledge to negotiate in good faith, outlined the context, tone and architecture of the negotiations,” said Mr. Trentini.

This year’s agreement, as was the case in 2021, prescribes wage increases to be calculated on the scheduled or gazetted minimum rates of pay per grade over the next three years. Rate A in year 1 will receive 6%; Rate H 7% and in years two and three of the agreement, Rate A will receive 5% and Rate H 6% respectively.

Apart from wage increases and this year’s agreement being reached almost two months before the expiry of the current agreement – again an unprecedented feat (in 2021 agreement was reached in October), the deal contains no additional and/or immediate cost to employment concessions. Importantly however, the exemption and special phase-in exemption dispensation for employers who feel that a degree of relief from the agreement is required is retained.  This is in direct response and a clear acknowledgement by the parties to also cater for SMME’s, their challenges, dynamics and sustainability.

“Of historical importance is the commitment by the parties to meaningfully address access to housing for industry workers,” Mr. Trentini said.

The parties have agreed to request the Board of Trustees of the Metals and Engineering Industries Benefit Funds, who oversee investments under management in excess of R149 billion, to develop an institutional framework, covering amongst other, eligibility and legal criteria, funding model/s, subsidy mechanisms and/or programmes and substantive policy approaches within three (3) months of the signing this agreement.

In addition, “stakeholders have agreed to convene and jointly formulate an industrial policy framework focused on re-building and repairing public infrastructure, alleviating bottlenecks constraining economic growth while ensuring the long-term sustainability of the metals and engineering sector,” said Mr. Trentini.

Finally, a number of outstanding issues have been identified and referred to various working groups and committees for further investigation, discussion and processing.

“SEIFSA applauds the trade unions for staying the course and living the bold, courage’s and ambitious goals and objectives embodied in the process agreement,” said Mr. Trentini.

“Three decades into our democracy it is heartening to witness that it is indeed possible for negotiating partners, in the heat of robust and adversarial collective bargaining to put the interests of the metals and engineering sector – and, indeed, the interests of our country – first,” Mr. Trentini said.


SEIFSA and unions call for a metals and engineering industries reconstruction, reindustrialization and development plan

SEIFSA AND UNIONS CALL FOR A METALS AND ENGINEERING INDUSTRIES RECONSTRUCTION, REINDUSTRIALIZATION AND DEVELOPMENT PLAN

Negotiations on the 10 April held between SEIFSA representing the 18 affiliated Employer Organizations, NUMSA, Solidarity, UASA, MEWUSA, SAEWA and NUM, culminated in the calling for a Metals and Engineering Industries Reconstruction, Reindustrialization and Development Plan in order to afford the industry an opportunity to re-set in an enabling environment underpinned by certainty, stability and industrial peace.

”With South Africa’s economic outlook unlike any experienced before, the time was ripe for parties to work together and more so, in the area of industrial policy, to construct a collective agreement that quickly and with minimal angst and anxiety settles the vexed issue of wages and brings all stakeholders together to jointly formulate a framework focused on re-building and repairing public infrastructure, alleviating bottlenecks constraining economic growth, while ensuring the long-term sustainability of the metals and  engineering sector, which is critical to the reconstruction, reindustrialization and development of the economy.”  Trentini said.

“SEIFSA applauds the trade unions for taking this bold and courage’s stand in putting the interests of the metals and engineering sector – and, indeed, the interests of our country – first. We remain cautiously optimistic that consensus will be found,” Trentini said.

The negotiating partners may just be on the verge of achieving something never achieved or at the very least never in the last three decades – and that is concluding an agreement during the currency of the existing agreement set to expire on 30 June 2024.

With negotiations set to continue on 24 April 2024, SEIFSA gave notice that it intends to reach out and work with all the employer and trade union stakeholders. The SEIFSA Council will also reconvene before the next round to receive a report back from the negotiators.

L Trentini

Chief Executive Officer

 


Expect More from this round of negotiations

Incendiary rhetoric related to main agreement negotiations has been a recurrent issue post 2010 and as this year’s negotiations approach, expect more of it.

In an economy hit by double-digit contraction, battered by an unprecedented and alarming jobless rate and languishing in sub-optimal economic growth, what should the key stakeholders - organized business and labour – be doing to lift SA and this sector out of this mess? Are stakeholders capable of reaching common cause in order to turn things around or as we have come to expect, will employers and labour simply not be able to find one another where it matters most – at the negotiating table. Who would have imagined almost three decades into our democracy we still need to resort to strikes and lock-outs to resolve our differences? Collective bargaining in its crudest form is almost always about power and ideology and stubborn leaders convinced that they are right.

Our disillusionment with the system, the country and the future is a normal response and should be acknowledged. But once that’s done it does not help to dwell on the negatives. This should not be taken as naive optimism, just a realistic acceptance that things are indeed tough at the moment, but we will get through. Never waste a good crisis, they say. This industry has certainly been, and is still in the midst of a number of crises. Surely, opportunity must abound? Indeed, but in the collective barraging space, where business and labour are on opposite sides as adversaries, who has the courage to take the first step towards the middle? In any negotiation, presuming both parties are equally skilled, common interest plays a role in shaping the deal. Where common purpose cannot be found because of a perceived lack of mutual respect the deal will almost inevitably unravel.

In the metals and engineering industries the collective bargaining model has proven to be remarkably resilient. Undoubtedly it has come under sever scrutiny and strain over the last couple of years but it has survived and some would even suggest thrived. Resilience grows from taking constructive steps and building a common purpose. Without common purpose, crafting solutions to entrenched differences will remain elusive. It’s time for all role players to stand up and be counted. Notwithstanding our diverse ideologies as between business and labour and amongst business groupings, finding a way forward in tolerance and mutual respect is now, more than ever, desperately needed.

Insofar as this year’s round of negotiations is concerned, we know things will not be easy and the challenges facing us are many. South Africa’s economic outlook doesn’t look good and there is little business confidence. The notion of job retention and/ or job creation on the back of an alarming high unemployment rate fuelled by ongoing retrenchments and business closures, has become elusive.

Persistent load-shedding, the worst in more than a decade, shows no signs of ending. Spiking unemployment, widespread business failures and huge job losses point to negotiations this year taking place against a difficult economic landscape. It would be fair to say that only if labour and business find a way of working together do we stand a chance of turning things around. It’s also fair to say that the relationship between supporters and detractors of gazetted agreements remain strained. Litigation continuous and in all likelihood may well continue into the future.

Trust amongst all stakeholders must be rebuilt and the national discourse must find a way of transcending beyond purely wages and terms and conditions of employment. Once negotiations over wages and conditions of employment have been settled, the focus must urgently shift to more important priority interventions, where labour and business collectively can play a part in tackling the deep underlying failures preventing meaningful growth in SA and our sector.   

In light of the above the Associations federated to SEIFSA will be proposing a settlement which envisages affording the industry an opportunity to re-set in an enabling environment underpinned by certainty, stability and industrial peace. 


Industry negotiations over the years have created a set of comprehensive and favourable employment conditions for employees that are essentially unmatched across most bargaining councils. Hence, we do not foresee any further amendments to benefits contained in the Main Agreement nor do we propose down varying existing terms and condition of employment, including safe guarding section 37 of the Main Agreement which protects members from having to engage in plant level bargaining.
______________________________________________________________________________________________________________________________________________________________________________

The SEIFSA Council has mandated that this year’s negotiations be structured around four broad principles, themes or business drivers:
  • a long-term agreement;
  • wages;
  • gazettal and extension; and
  • exemptions incorporating special phase-in dispensation.
______________________________________________________________________________________________________________________________________________________________________________
 
As there is a nexus or connectivity between these four themes, consensus must be reached on each of the drivers before an agreement can be considered. It is also envisaged that all outstanding issues be dealt with in-line with the provision as set-out in an already signed-off Process Agreement and that this process commence immediately once a Settlement Agreement has been concluded.
 
Finally, resilience comes from chartering a clear purpose and being part of something bigger than any individual or grouping. As Nietzsche said, he who has a why to live for can bear almost any how. The future will be created by those who have the courage to take action and lead.

Initiating Negotiatons for the Amendment of an existing Agreement in terms of Clause 10 and Annexure E of the MEIBC Constitution

 25 March 2024 

Mr. Sicelo Nduna 

General Secretary 

MEIBC 

Facsimile: 086 636 8690 

Email: sicelon@meibc.co.za 

Dear Mr Nduna 

INITIATING NEGOTIATONS FOR THE AMENDMENT OF AN EXISTING AGREEMENT IN TERMS OF CLAUSE 10 AND ANNEXURE E OF THE MEIBC CONSTITUTION: CONSOLIDATED MAIN AGREEMENT 

SEIFSA, acting in accordance with the mandate of the member Associations contained in the attached schedule, request you, in accordance with Clause 10 and Annexure E (2) of the MEIBC Constitution to convene a negotiating meeting at your earliest convenience. 

Insofar as this year’s round of negotiations is concerned, we know that things will not be easy and the challenges facing us are many. South Africa’s economic outlook doesn’t look good and there is little business confidence. The notion of job retention and/ or job creation on the back of an alarming high unemployment rate fuelled by ongoing retrenchments and business closures, has become elusive. 

Persistent load-shedding, the worst in more than a decade, shows no signs of ending. Spiking unemployment, widespread business failures and huge job losses point to negotiations this year taking place against a difficult economic landscape. 

It would be fair to say that only if labour and business across the board find a way of working together do we stand a chance of turning things around. It’s also fair to say that the relationship between supporters and detractors of gazetted collective agreements, like the Main Agreement, are strained. Litigation continuous and in all likelihood may well continue into the future. 

Trust amongst all stakeholders must be rebuilt and the national discourse must find a way of transcending beyond purely wages and terms and conditions of employment. 

 Once negotiations over wages and conditions of employment have been settled, the focus must urgently shift to more important priority interventions, where labour and business collectively can play a part in tackling the deep underlying failures preventing meaningful growth in SA and our sector. 

In light of the above the Associations federated to SEIFSA propose concluding an agreement which envisages affording industry an opportunity to re-set in an enabling environment underpinned by certainty, stability and industrial peace. 

Industry negotiations over the years have created a set of comprehensive and favourable employment conditions for employees that are essentially unmatched across most bargaining councils. Hence, we do not wish to pursue any further amendments and/ or adjustments to benefits currently contained in the Main Agreement nor do we propose down varying existing terms and condition of employment. Equally important is our position on Section 37 of the Main Agreement i.e., that it must be retained. 

Accordingly, we formally give notice that our approach to this year’s round of negotiations will be structured around four (4) broad principles or themes, namely: 

  • a long-term agreement; 
  • wages; 
  • gazettal and extension; and 
  • exemptions incorporating special phase-in dispensation. 

As there is a nexus or connectivity between these four themes or business drivers, consensus must be reached on each of the drivers before an agreement can be considered. 

We also propose that all outstanding issues be dealt with in-line with the provision as set-out in paragraph 6 of the signed-off Process Agreement and that this process commence immediately once a Settlement Agreement has been concluded. 

In closing, it is our hope that the employer and trade union parties in the MEIBC will make every effort to successfully conclude the industry negotiations on or before the expiry of the current agreement on 30 June 2024. 

We ask that you please bring the views of our member Associations, as articulated herein, to the attention of the party trade unions and the other employer organizations on the Council. 

Yours Sincerely 

Lucio Trentini 

Chief Executive Officer 

Cc: Elias Monage, SEIFSA President 

Association Chairpersons 

NEASA, CEO, SAEFA, (SA) UEO, FEOSA – by email 

NUMSA; NUM, Solidarity; UASA – The Union; MEWUSA and SAEWA - by email 

________________________________________________________________________________________

The List of Registered Employer Organizations’ Federated to SEIFSA and Party to the MEIBC 

Association of Electrical Cable Manufacturers of South Africa 

Cape Engineers’ and Founders’ Association 

Constructional Engineering Association (South Africa) 

Electrical Engineering and Allied Industries’ Association 

Electrical Manufacturers’ Association of South Africa 

Gate and Fence Association 

Hand Tool Manufacturers’ Association 

Kwa-Zulu Natal Engineering Industries’ Association 

Iron and Steel Producers’ Association of South Africa 

Lift Engineering Association of South Africa 

Light Engineering Industries’ Association of South Africa 

Non-Ferrous Metal Industries’ Association of South Africa 

Eastern Cape Engineering and Allied Industries Association 

Refrigeration and Air Conditioning Manufacturers’ and Suppliers’ Association 

S.A. Electro-Plating Industries’ Association 

S.A. Refrigeration and Air Conditioning Contractors’ Association 

S.A. Pump Manufacturers’ Association 

S.A. Valve and Actuator Manufacturers’ Association 


SEIFSA report outlines risks for Metals & Engineering sector in 2024

The outlook for the South African Metals & Engineering sector in 2024 is not as bleak as it was last year, but risks — both local and global — remain high, according to the State of the Metals and Engineering Sector Report 2024, which the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) released this week.

The report, which was presented in a webinar on February 20, examines the current state of the Metals & Engineering (M&E) sector amid moderating inflation and heightened geopolitical tension.

SEIFSA chief operating officer Tafadzwa Chibanguza, says “the geopolitical temperature is high, with wars in Europe and the Middle East and the subsequent attacks in the Red Sea.”

Aggregate production increased by 1.7% in 2023, slightly higher than the 1.5% in 2022 but still remains 18% below where it was in 2008/2009.

“Production has also not sustainably attained its pre-Covid lockdown levels and has been oscillating between 1-2 index points around this level,” Chibanguza said.

This is amid the “expectation for global economic growth to flatline into the medium term, which presents a neutral perspective on demand prospects from the external environment. Growth is primary tilted in favour of the advanced economies, which presents limited export opportunities  given that Sub-Saharan Africa is the largest export market for the sector,” says Chibanguza.

Geopolitical risks include the ongoing wars in Europe and the Middle East, while locally the sector faces persistent load-shedding, logistical challenges, including the crisis at Transnet, deteriorating service delivery at municipal level, looming wage negotiations and the uncertainty of an election year along with the political noise that leads up to the event, he says.

“Whatever the outcome of the election, it presents risk as a lot of work has been done in terms of macro-economic policy around for example energy and public procurement. . A new administration means dealing with new members of parliament and a new cabinet.”

On the positive side, inflation is subsiding faster than expected, particularly in the advanced economies, which should allow for hard currency rate cuts, which in turn should set the scene for global monetary policy, says Chibanguza.

Global inflation is set to decline from 6.8% in 2023 to 5.8% in 2024, and 4.4% in 2025, which should set the scene for interest rates to start coming down. Declining interest rates presents a scenario for investment in the economy to hopefully start picking up which in turn is a good demand source for the metals and engineering sector. It will also decrease the pressure on debt service costs for the state, possibly creating fiscal headroom, for state spend into the economy, which again is another important source of demand for the sector. Lastly, lower interest rates should also provide room for companies in the metals and engineering sector to increase investments into their operations, which is particularly important given the negative net investment trend that has underpinned the sector since 2008, which has also resulted in the sectors fixed capital stock deteriorating at a rate of 0.8% (CAGR) over the same period.

While work has been done to revive the economy, reforms take time for their full effect to be realised, but unfortunately the sectors potential will remain constrained for as long as too many local companies remain in survival mode due to the array of challenges they face.


Industry Wage Negotiations Kick-off

INDUSTRY WAGE NEGOTIATIONS KICK-OFF

Negotiations this year will take place against a very difficult economic background. The sector is still in the throes of deep distress. A fragile economy, spiking unemployment, widespread business failures and huge job losses will no doubt test our mettle.

On a positive note, talks-about-talks are already well underway and to date all the parties have signed-off on a process or relationship agreement and a declaration to negotiate in good faith. A pre-bargaining conference was held on 7 February and a negotiating timetable has been agreed. Whilst all this on the surface may not seem to amount to much, it is all unprecedented and hopefully a sign that the difficulties we find ourselves in are shared by our union counterparts.

In terms of the timetable the following has been agreed:

Month Process Comments
7th February Pre-Bargaining Conference Understanding Industry Issues and Challenges
25th March

 

Submission and Exchanging of Demands and Triggering

Annexure E of the Council Constitution

Finalize respective parties demands, exchange of demands and triggering

Annexure E

10th April Commencement

of Negotiations

Commencement of   negotiations
24th April Negotiations Negotiations
8th May Negotiations Sign-off

You will observe we have set a tight time-line with the aim of settling early, within mandate and with minimal disruption. We understand how difficult this will be but this time round, parties are faced with a set of daunting circumstances that simply cannot be ignored. Manufacturing performance is anything but encouraging, persistently high interest rates, electricity outages, failing logistics and weak demand have all lead to a sector that is under siege.

Mandating, tactics and strategy will play a key role in delivering a sound agreement. We ask that member companies play their part in supporting their respective Associations who play an important role in formulating a consolidated mandate that allows the Main Agreement Negotiating Team to develop the tactics and strategy.

At the outset I extend a note of immense gratitude to all members of the 2024 Main Agreement Negotiating Team who during the process, will sacrifice an inordinate amount of time, effort and energy – over and above their day-to-day jobs – supporting the Office and me in ensuring that we meet the goals we have set.

This will be a difficult round but, in the end, we will succeed if we just stay the course.

Lucio Trentini

Chief Executive


SEIFSA position on Scrap Metal Regulations

Johannesburg, 5 FEBRUARY 2024. In anticipation of the Minister of Trade, Industry and Competition, Minister Patel’s, decision on the way forward regarding the scrap metal regulations and following the extended public comment period which closed on the 12th of January 2024, SEIFSA encourages the Minister not to take a narrow and short-term view on the matter, but rather consider the broader consequences of the decision and what is best for the industry in the long-term.

With the benefit of hind-sight the undeniable facts that should be factored into the Minister’s decision making are that the scrap metal export ban was not at all effective in combating infrastructure damage and theft of  scrap metal.  The imposition of the export ban has caused more economic harm than good. This is evidenced, inter alia,  by  the policy being one of the contributing factors to the announcement by ArcelorMittal South Africa (AMSA) on the possible closure of its long-products business. The export ban also communicated a very poor economic signal where blunt industrial policy instruments are deployed to combat crime, which resulted in a myriad of unintended consequences.

The lapsing of the scrap metal export ban on the 15th of December 2023 and the extension of the public consultation period to the 12th of January 2024, has brought to the fore the fact that alternatives to an export ban are a very real possibility.

The first of which is the development of  an industry pledge, co-created by the DTIC and industry to work together to combat the movement of illegitimate scrap metal. This will be done by, inter alia, the  phasing out of the use of cash in scrap metal transactions, rigorously inspecting the origins of scrap metal  and an  industry  zero-tolerance approach to purchases of scrap metal from unidentified sources or where the product may reasonably be suspected to be from stolen public infrastructure. The industry remains committed to signing such a pledge that is underpinned by these principles. These interventions will  go a very long way in combating the movement of illicit scrap metal without the need of resorting to an export ban.

Moreover, industry in the up and downstream segments  remains committed to working with the DTIC and Government more broadly in the development of industrial policy framework that is sustainable and conducive to the growth of the industry. However, a pre-condition for the successful development of this industrial policy framework is ensuring demand for steel and related products through consistent and large-scale public projects. To date this has been a major constraint to the economic benefits  of the steel sector, which has resulted in production contraction and a structural decline in employment.

The industry is willing to remain engaged and work with the policy makers in finding sustainable solutions to the complex challenges facing the industry, however, the policy path adopted needs to be holistic and not inadvertently create pockets of tension between different segments of the industry. .


Find the middle ground to avert collapse

South Africa’s metal and engineering sector, which is used as a measure of the overall economy’s performance is living through unprecedented times and we can confidently say we are facing a bleak year. The last three years have been extremely challenging and the next twelve months look set to be no less challenging.

The sector continues to face many risks and uncertainties such as the return of loadshedding, bottlenecks at Transnet’s sprawling logistics infrastructure and policy uncertainty ahead of the 2024 national and provincial elections. Confidence in South Africa is at a record low. And yet, the sectors recovery is crucial for the country’s economic prospects, as it has the potential to boost productivity gains for the economy, exports, investment, innovation and job creation. The number of ever-increasing unemployed people should instill a sense of urgency into fixing our economy. Failing that, we run the risk of entrenching the kind of poverty that can upend the social compact that underpins our democracy.

Times are tough in the country now. The news seems relentlessly depressing. Intense anger grows because so many of the problems closing businesses and killing jobs could have been avoided. Our disillusionment with the state of our country, industry and the future is normal, but once that’s registered, leaders across the board must find it within themselves to move the conversation beyond the doom loop.

Employers and trade unions at a Metal and Engineering Industries Bargaining Council (MEIBC) meeting on Tuesday, 30 January signed a landmark process or relationship agreement giving the green light for the commencement of the 2024 round of wage and conditions of employment negotiations under a set of rules, guidelines and guiding principles that to date have been absent from our engagements

Starting is easy, staying the course tests one’s mettle, finding common ground and closing the deal is a reflection of having found common purpose. But at the heart of the matter are the basis and nature of industrial relations in SA, which by definition place capital and labour permanently on opposite sides as adversaries.

In collective bargaining, only when the parties find sufficient intersections of common inputs to a solution to be generated is a deal possible. In a traditionally adversarial setting and particularly when the going gets tough and faced with the prospect of negotiations completely unravelling, the side that takes the first step towards the middle is most likely to get the best deal; if there is a middle.

This year industry negotiations take place against a landscape that is unprecedented. Bargaining partners are faced with a number of crises ranging from economic (energy, supply chain, inflation, interest rates etc.) socio-economic (rising unemployment, spiraling cost of living) and a macro and micro economic scenario that point to a sector that is showing very little prospects of real, meaningful, jobs rich, inclusive economic growth.

Yet, in spite of all these challenges the parties have signaled their intent to engage one another at the negotiating table. As a precursor to the formal engagement process the parties have framed in a signed agreement how they intend engaging and interacting with one another. Further, a pre-bargaining conference will be held in order to clearly understand the landscape industry finds itself, with the aim of understanding industry’s challenges, prior to each party returning to their respective constituencies for a mandate.

Parties this year have set themselves the ambitious target of settling withing the currency of the current agreement, which lapses on 30 June 2024. This amounts to an unprecedented achievement but then again, this industry is known for doing what most thought impossible.

In the final analysis, we have no option but to persevere, if we steadfastly stick to thinking we’re right and the other side is wrong, the centre won’t hold and collective bargaining will collapse. No common purpose, no industrial peace, no progress.

The process or relationship agreement brings together a spectrum of diverse ideologies between and amongst different employer and trade union groupings with the hope they can move forward in prosperity, tolerance and harmony, maybe impossible to imagine. But, as Lao Tzu so aptly puts it, "A journey of a thousand miles begins with a single step," an inspiring reminder of the importance of taking that first step, regardless of the obstacles that may lie ahead.


Steel and Engineering Sector on the Precipice of an Unprecedented Jobs Crisis

The employment trends in the metals and engineering sector are an important indicator for the underlying structural constraints that have plagued the sector for the last decade and a half. The sector currently employs 362 871 people, which is a significant drop from the 577 507 people employed in 2008. This equates to a decline of 214 636 jobs, or 37.2% and when measured on a compound basis, represents a 2.9% decline per annum over this period.

Employment in the sector has decreased at double the rate production has decreased over the same period. Considering the steel sectors induced economic multiplier of 2.7 times, the employment multiplier of 6 times and the dependency ratio of between 7 to 10 people relying on each formal job, the sectors employment trends spell wide scale social and economic disaster.

The steel and engineering sector is crucial to the South African economy, it is the backbone of the country’s industrial base which is akin to none on the continent. Apart from the traditional arguments of the virtues of the manufacturing sector which include the productivity gains to economic growth, higher income elasticity of demand for manufactured goods and the spill over of growth to non-manufacturing sectors in response to growth in manufacturing output, the steel and engineering sector is also a strategic avenue through which the country converts its vast mineral endowment to final engineered products. This locks in a higher degree of value add domestically.

The value chain represented in the sector constitutes the entire metals value chain from metal production (ferrous and non-ferrous), merchants and service centres, metal fabrication to heavy and light engineering. The sector is a crucial supplier of inputs into sectors such as agriculture, mining, the automotive sector, construction, the electricity supply industry across all its facets, logistics and water sectors. Moreover, the sector is export intensive, with 40% of total production being exported, raising the country’s foreign exchange receipts by USD $20 billion annually.

Despite the sectors far-reaching impact and diversified demand profile the innate potential is unfortunately not being realised. The recent announcement by ArcelorMittal South Africa (AMSA) on the closure of its operations in Newcastle and Vereeniging, as well as ArcelorMittal Rail and Structural bears testament to this. The prospect of this development materialising is a major cause of concern which will only add to exacerbating the downward spiral to employment in the sector.

The long products operations under consideration include the country’s only local mill capable of producing long steel from iron ore which are critical in industries such as construction, automotive, mining, electro-technical, electricity transmission, rail, wire and fasteners industry.  The reliance of these downstream industries is not a preference question but rather higher quality and safety specifications. Faced with the  prospect of a lack of domestic supply, these downstream industries will have no alternative but to look to import their feedstock, which translates to the loss of much needed domestic jobs, further deepening the unemployment crisis.

The intrinsic nature of risk mitigation for businesses is to act on eliminating potential risks before they become events, meaning that the horse may have already bolted in a number of instances. When import alternatives are bedded down, they are likely to become entrenched thereby structurally altering the industrial landscape permanently, to the detriment of South Africa’s industrialisation aspirations and fortunes.

Of the 362 871 employed in the sector, the downstream industries account for 90% of the employment with the balance being employed in the upstream. This number has evolved from 80% (downstream) and 20% (upstream) over the last 15 years.  The  sector employed 577 507 people at the peak of 2008. Although the job losses have been felt across the entire value chain, they have mostly been concentrated in the downstream industries, which have accounted for 60.2% of the losses recorded over this period. The point being that the propensity of the sectors employment losses, as a result of the structural vulnerabilities and headwinds faced by the sector, mostly materialise through employment losses in the downstream industries. It is therefore reasonable to conclude that the impact of the plant closures will mostly be felt in the downstream where the bulk of employment resides. Of even greater concern is that a number of companies in the downstream have started estimating the business cases of importing their final product as opposed to semi-finished products (billets, blooms, etc.,) for further processing locally. This will have even wider employment ramifications by eliminating other intermediate processes like forging, galvanising and packaging, thereby converting many existing factories into distribution warehouses.

Another important structural dynamic emanating from the employment trends is a continued decoupling of the relationship between employment and production i.e.,  increases in production is becoming a less sufficient condition for employment creation. The latest estimates indicate that a 4.7% increase in production is required to induce a 1% increase in employment. An alternative approach to confirm the analysis is the fact that between 2008 and 2023 production has decreased at a rate of -1.3% (CAGR) while employment has decreased at -2.9% (CAGR). Given globalisation and greater levels of mechanisation, this phenomenon is not entirely surprising, however, the data indicates that periods of deep structural adjustment, like the 2007/8 global financial crisis, COVID lockdowns and periods of production disruption as a result of industrial action have tended to worsen the trend. The AMSA plant closures, which will present a major headwind for the sector, followed by a deep and painful structural adjustment, will deepen the decoupling pattern.

In the final analysis, the reasons for the AMSA plant closure are structural, namely: low economic growth, anaemic gross fixed capital formation, electricity and logistics challenges. These are factors faced by companies in the entire value chain and without urgent intervention and reform are unlikely to be resolved in the medium term. It is conceivable therefore that in the absence of reform, the rate of employment declines observed thus far can be projected into the medium term with some modifying factors applied to account for the AMSA closure.

Taking into account the 3500 employees that will be directly affected by the plant closures, projecting the 2.9% (CAGR) rate of decline across the entire steel and engineering sectors employment and applying the steel sector employment multiplier, on a five-year horizon, SEIFSA’s estimates the employment losses could amount to a staggering 293 754 direct and indirect job losses.

This is an outcome that South Africa, given its already untenable unemployment rate, can ill-afford. Doing everything possible to finding lasting solutions to averting the announced plant closures should dominate our and governments agenda, failing which industry and the economy will be left to deal with a catastrophic socioeconomic jobs crisis of unimaginable proportions.