Trade and Industry Minister Dr Rob Davies confirmed last week that he had signed off on a hot-rolled coil (HRC) safeguard duty, but refused to be drawn on the duty level proposed until the Word Trade Organisation (WTO) had been notified.
Speaking in Johannesburg at the release of the ninth Industrial Policy Action Plan (Ipap 2017), Davies reiterated the importance of sustaining a primary steel industry, which had come under intense pressure as a result of the current global oversupply of steel.
He also insisted that government was also taking active steps to support the domestic downstream steel sector, with some steel fabricators having expressed concern that additional protection against primary steel imports could undermine their competitiveness.
The safeguard duty had been proposed following an investigation by the International Trade Administration Commission of South Africa, which determined that there had indeed been an unexpected surge in imports of HRC into South Africa and that these cheap imports were causing injury to the domestic industry.
Once the WTO notification process had been followed, the safeguard duty would be imposed over and above the 10% tariff protection already in place for HRC and a range of other primary steel products.
South Africa previously had no import protection in place for primary steel products, but started to raise tariffs to the 10% bound rate allowed for under South Africa’s WTO commitments in 2015 and 2016.
The introduction of the 10% duties was justified on the basis of the distress being experienced in the primary steel sector, epitomised by the 2015 halting of steel production at Highveld Steel & Vanadium, the country’s second-largest steel producer.
The country’s largest steel producer, ArcelorMittal South Africa (AMSA), lobbied intensively for both bound-rate and safeguard protection, making pricing, investment and employment commitments in return.
AMSA CEO Wim de Klerk said the company was firmly of the view that safeguards were required to reduce cheap imports, arguing that import duties on their own had not been sufficient to stem the flow. He added that AMSA would continue to work with government, regulators and the downstream industry to “ensure a sustainable solution for all concerned and to preserve the tens of thousands of jobs that depend on the local steel industry”.
Last year, AMSA and government agreed on a new pricing mechanism for flat steel, based on a steel-price basket rather than import parity pricing. In addition, government agreed to designate locally made steel products and components for public-sector construction projects.
Davies stressed that some protection had also been put in place for downstream products and announced that a new Steel Industry Competitiveness Fund would be established to support companies that added value to primary steel.
Economic Development Minister Ebrahim Patel would release details of the new incentive, to be administered by the Industrial Development Corporation (IDC), in the coming weeks.
Davies emphasised that the scheme had budgetary support and was aligned to the Department of Trade and Industry’s (DTI’s) decision to shift its resources from generic incentives programmes towards sector-specific initiatives.
Besides the steel incentive, government would also launch tailored incentives for agroprocessing and the foundry subsector.
Some generic incentives, including the flagship Manufacturing Competitiveness Enhancement Programme, would be sustained. But, increasingly, government industrial financing activities would be targeted in line with successes achieved in the automotive, clothing and textiles sectors.
The new incentives would be specifically selected for their propensity to create jobs, Davies said, highlighting the employment potential for both agroprocessing and foundries.
Ipap 2017 also outlines plans for an accelerated roll-out of government’s Black Industrialist Programme, which is backed both by R1-billion in grant funding and by a R20-billion IDC funding facility.
Davies reported that 40 entrepreneurs had already been selected for support under the programme and announced that the intention was to support 100 black industrialists by March 31, 2018, two years ahead of the original target date.
He acknowledged that the criteria for support were stringent, but said that the intention was to elevate “hands on” industrialists “to the next level”. In other words, the programme was not designed to stimulate share transactions, but rather enhance the competitiveness of existing black-owned enterprises.
Davies also made a direct link between Ipap 2017, generally, and the Black Industrialist Programme, in particular, and the call for ‘Radical Economic Transformation’.
“We’ve got to promote more involvement of more South Africans, and particularly South Africans that were excluded in the past, in roles of ownership, leadership and participation in the productive economy,” Davies said. Such “inclusivity” should be pursued simultaneously with a reindustrialisation of the economy.
Manufacturing Circle executive Philippa Rodseth welcomed the new sector-specific investment incentives, noting that the organisation had worked closely with the DTI in planning the new agroprocessing incentive, in particular, to bridge the gap between policymakers and industry.
“This is a great opportunity for job-rich growth and, while we await further details on funding . . . we are optimistic that this new programme will make sense to both government and industry.
Rodseth also signalled the organisation’s support for the proposed new incentive to support the downstream metals sector and again expressed a desire to offer input. “When tackling government on the fine print, we will seek similar principles to those discussed regarding the agroprocessing incentive – on the need to look at the whole value chain and linkages, on the need for economies of scale.”