Johannesburg - The government should designate all steel products for local content unless the products could not be produced in South Africa, Scaw Metals chief executive Markus Hanneman said yesterday in an interview with Business Report.
The designation of steel products could be a lifeline for struggling local steel players given the government’s multibillion-rand public infrastructure investment programme.
Read: 'Steel linked to South Africa's growth'
Since 2011, the Department of Trade and Industry can designate industries, sectors and sub-sectors for local production with minimum local content thresholds.
This year the National Treasury said it had a public sector capital expenditure of R865.4 billion over the next three years. State-owned companies would spend R337bn of that amount. R291.6bn would be spent in the steel-intensive transport and logistics sectors.
The government identified public procurement as one of the levers in the Industrial Policy Action Plan. The public sector infrastructure expenditure as a share of gross domestic product increased from an average 5 percent between 1998/99 and 2004/05 to an average 6.6 percent between 2005/06 and 2014/15, according to the Treasury.
Hanneman said: “Why not designate everything? Surely that will create opportunities for South African businesses.”
Market conditions
He said Scaw Metals had worked hard to meet criteria required by state-owned firms. The steel product manufacturer has a level 2 broad-based black economic empowerment rating. “It is easy to blame unfavourable market conditions. But sometimes you have to look inward. Ask yourself – what will it take for a (state-owned companies) to buy products from you?”
Hanneman said the general state of the manufacturing sector was a concern. Some of Scaw Metals’ rolled products were sold to customers in the construction and manufacturing industries.
South African manufacturers were battling falling sales, rising unsold inventory levels and increasing costs, according to a survey of manufacturing sector advocacy group, the Manufacturing Circle.
The Steel and Engineering Industries Federation of SA chief economist Henk Langenhoven said yesterday that theoretically the potential benefit of successfully recapturing lost domestic market to imports was enormous.
The total domestic market for metals and engineering sector products grew to a peak in 2013 and had contracted by 2 percent, said Langenhoven.
Higher production
“South African producers’ share of this market peaked in 2002 at 68 percent and has since declined by 13 percent to only 48 percent. If South African producers were able to maintain their market share – all things being equal – production would have been R114bn higher in 2015, which translates into roughly 80 000 more people employed, as against the 45 000 jobs lost since 2007,” he said.
The National Union of Metalwokers of SA has also called for the designation of all steel products. Acting spokesman Patrick Craven said yesterday that state-owned and private companies should buy local products instead of importing.
“This is particularly relevant to the steel industry which is facing a major crisis and potential loss of thousands of jobs, partly as a result of the world decline in demand for steel and also the widespread purchasing of imported steel by South African manufacturing industry and state-owned companies such as Eskom, as a result of National Treasury’s delay in issuing notices to these entities instructing them to use designated products,” said Craven.
BUSINESS REPORT