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Johannesburg - The government has come under fire from the National Employers Association of South Africa (Neasa) following a decision to sign off on a 12 percent safeguard duty on imported hot rolled steel.

Gerhard Papenfus, Neasa chief executive, yesterday criticised the safeguard, saying it would undermine the competitiveness of the downstream steel industry, which Neasa represents.

Papenfus’s comments come after government has informed the World Trade Organisation (WTO) of its intention to introduce the 12 percent safeguard, which is in addition to the existing 10 percent customs duty.

The 12 percent safeguard meant that there would be a 22 percent tax on imported hot rolled steel, and this would cause irreparable harm to the downstream steel industry, Papenfus said.

He added that the safeguard would protect ArcelorMittal South Africa (Amsa), a unit of the world’s biggest steel producer.

“The question is: why would the government decide to protect Amsa, a primarily foreign-owned entity, to the detriment of ten thousand South African downstream steel manufacturers and hundreds of thousands of employees?”

Papenfus charged that, when steel prices were high, the owners of Amsa took billions out of the country instead of investing in a modern mill capable of producing high-quality steel at much cheaper prices.

“The effect of this is that Amsa’s antiquated plant produces hot rolled-base steel at $550 (R7 366) a ton, while the world is trading at $460 a ton.

“When the price of steel hit rock-bottom at $250 a ton two years ago, many mills were in trouble globally,” Papenfus said.

“Currently, however, at $460 a ton, modern mills have returned to profitability. Old-technology mills also utilise 60 percent more electricity compared to modern mills,” he said.

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Amsa CEO Wim de Klerk said yesterday the company “remains firmly of the view that safeguards are essential to the reduction of cheap imports that continue to plague the sustainability of the steel sector in South Africa. We have seen that import duties on their own have not been sufficient to stem the flow of cheap imports.”

Trade and Industry Minister Rob Davies yesterday reiterated the importance of sustaining the primary steel industry, which is constrained due to the import of cheap Chinese products, subdued prices and low demand.

Papenfus also said that the decision was in conflict with the findings of the International Trade Administration Commission (Itac), which found that the introduction of a safeguard duty is not in the public interest.

Itac is a statutory body specifically tasked to investigate and advise the government on the impact of import duties on industries.

De Klerk said “Itac made it clear that the Essential Facts letter summarised the facts and did not amount to a final decision ... Itac follows a rigorous process in terms of the WTO rules and all the criteria for the imposition of a safeguard duty were met. It is deliberately misleading to suggest that the conclusion was arrived at other than through a process of good governance.”