A Cape Town producer of steel billets and reinforcing bars has lodged an appeal against the Department of Trade and Industry's (DTI) decision not to approve the company's expansion as a strategic industrial project (SIP).

Cape Town Iron and Steel Works is hopeful of a decision about its appeal before Christmas, the company's financial manager John Tenent told Engineering News Online yesterday.

The company filed its initial SIP application with the DTI in September, seeking SIP status for its R85-million expansion project to manufacture steel billets and reinforcing bars to meet growing demand from China.

SIP is an incentive programme designed to encourage investments into South African operations from local and foreign investors.

Its primary aim is to contribute significantly to the growth, development and competitiveness of specific industry sectors by providing additional industrial investment allowances, in the form of tax relief, to qualifying industrial projects.

The programme represents an inventive step by the South African government to raise levels of private sector investment in innovative and profitable schemes in South Africa, while simultaneously creating employment opportunities within the industrial sector.

Qualifying industry sectors are manufacturing, IT and research and development, which government considers to be essential for the future competitiveness of the country's industry.

Tenent explained that the appeal is retrospective, as the expansion has already been completed.

As part of the expansion, the company installed two new furnaces, which has raised output capacity by 40% - to 130 000 t/y of reinforced steel bars and 250 000 t/y of steel billets.

About 50% of the billets, used to produce steel supports for the construction industry, are exported to the Far East.

It is understood that the DTI's decision not to endorse Cape Town Iron and Steel Works' application comes as a result of the company not meeting one or two necessary criteria, specifically regarding the creation of direct employment.

Some 220 people are currently permanently employed by the firm.

“In our application we did show that we expected to create some downstream jobs, but the DTI did not agree with our calculations,” Tenent pointed out.

The SIP programme is valued at R10-billion in additional industrial investment allowances, over a four-year period, which began on August 1, 2001.