Industrial base growth will stimulate more growth in steel industry

Growing the Eastern Cape industrial base will assist in stimulating growth in the struggling steel industry, says the Industrial Development Corporation (IDC).

The steel industry has been hard hit by declining commodity prices and the global decline in demand and oversupply by major producers in a depressed steel market. With the collaboration of the Downstream Steel Industry Competitiveness Fund, IDC, as well as the South African government, there are hopes to increase competitiveness in the steel industry and incentivise production.

Managed by the IDC, this fund will add to the various government interventions for the industry, which include tariff and local procurement measures as well as commitments for job retention, investment and upgrading.

“Through these challenging times for the steel industry, innovation is key. The value chain – primary steel mills, fabricators and domestic manufacturers at different levels – are innovating and finding novel ways of staying sustainable and competitive while contributing to the economic growth story of the Eastern Cape,” says IDC Eastern Cape regional manager Kingsley Dell-Robertson.

Amid these challenges, the IDC, in partnership with Steel and Engineering Industries Federation of Southern Africa (Seifsa), has searched for the most innovative companies of the year in the metal and engineering sector. Through the Seifsa Awards for Excellence, innovative and competitive companies that are in the metals and engineering sector are rewarded for continued growth and innovations.

He explains that as the domestic steel industry continues to fight its way out of the global recession, major manufacturing and infrastructure projects, along with the expansion and diversification of the automotive sector, will help curb the effects of the steel crisis.

In an effort to build a local steel industry producing products at competitive prices, the IDC has invested over R1-billion in five steel mini mills. Dell-Robertson points out that steel producer Agni Steel, based in Port Elizabeth, in the Eastern Cape, is one of the mills in operation.

Agni Steel, which manufactures steel billets, successfully commissioned the first mini steel mill in the Eastern Cape in 2014. Through this project, the IDC has fostered beneficiation of local ferrous scrap metal which is normally exported unbeneficiated.

The investment has also facilitated job creation and helped Agni Steel to absorb low-skilled workers in the sorting and preparing of scrap metal for the furnace. To date, Phase 1 of the project has created 189 new permanent jobs. Agni Steels hopes to construct a new furnace to create an additional 54 new permanent jobs with about 60 temporary South African job opportunities during the construction phase.

“Agni Steels SA could only roll out its second phase expansion plans because of government’s initiatives. We applaud government for bringing about an import duty on cheap steel being imported into South Africa. “The most important factor sustaining the steel manufacturing industry in South Africa and jobs are mainly because of government’s initiative, by implementing the Price Preference System. This initiative will contribute to greater job creation in South Africa,” says Agni Steels SA director Hassan Khan.

With a view to fast-track support for the struggling steel industry, government, through the International Trade Administration Commission of South Africa (Itac), has introduced a price system for the industry in an effort to boost production in local foundries.

Dell-Robertson explains that this follows an investigation on a number of downstream steel industry products, including wire products, screws, bolts and nuts, tube and pipe fittings, appliances, prefabricated structures, grinding media and roofing products – as Itac sets out to help government build a competitive steel industry that can support investment and increase jobs and exports.

The steel and engineering industry has a strong base in East London and Port Elizabeth, centred on the automotive industry. Both the Coega and the East London industrial development zones have opportunities to develop downstream metals and engineering industries. While the steel industry – along with machinery and equipment – is still the third largest contributor to gross domestic product in the province, much more still needs to be done to propel the sector out of crisis.

“Industrialisation in the Eastern Cape is key to economic growth – both provincially and nationally. “Manufacturing still contributes significantly to the economy and for our province this is largely driven by the needs of the automotive sector. This industry is only set to grow with new investments such as our joint venture with vehicle and machine manufacturer Beijing Automotive International Group just one example of the IDC’s investments in this province,” he says.

Interventions supporting the value-adding, labour intensive, downstream steel industry remain a priority for government.

“With serious challenges facing South Africa’s steel sector, building a sustainable and competitive industry is a priority. As we build sustainable steel businesses with diversified production, benefits will be felt, not only in the regional economies in which they are based – but also in broader sectors and industries,” concludes IDC basic mining and metals head Mazwi Tunyiswa.

The IDC and the South African Institute of Steel Construction (Saisc) have worked together on several different projects to promote growth in the steel industry. Saisc has also received assistance from the IDC to help downstream manufacturers through tariffs.