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- The Steel Engineering Industry Federation anticipates that a recovery kicked up by infrastructure development could create 200 000 downstream jobs.
- According to SEIFSA, the steel sector accounted for 13 000 of the 660 000 jobs lost in the second and third quarter of 2021.
- President Cyril Ramaphosa said the state would invest R1.8 billion in bulk infrastructure to unlock private sector projects worth R133 billion.
With government and business both looking to infrastructure development as a catalyst for economic recovery, there is consensus on one thing: cooperation will be needed to kick off building projects before growth becomes a reality.
The Steel and Engineering Industry Federation of SA (SEIFSA) agrees that a pro-business agenda was clear in President Cyril Ramaphosa's State of the Nation Address (SONA) on Thursday evening, and it is hopeful that government's plans to invest in infrastructure development – and support localisation – will help the beleaguered steel and engineering sector recover.
It is also hoping for the creation of some 200 000 downstream jobs through manufacturing and infrastructure development projects.
Steel and engineering has a knock-on effect on other industries, such as mining and manufacturing, but some 660 000 jobs were lost in the sector – which is also still recovering from a bruising three-week strike last year – in the space of just one quarter in 2021.
During his SONA, Ramaphosa said government would prioritise infrastructure projects to support economic growth and better livelihoods, especially in energy, roads, and water management.
"The Infrastructure Fund is at the centre of this effort, with a R100 billion allocation from the fiscus over 10 years. The Infrastructure Fund is now working with state entities to prepare a pipeline of projects with an investment value of approximately R96 billion in student accommodation, social housing, telecommunications, water and sanitation and transport," said Ramaphosa.
He added that the Infrastructure Fund would collaborate with state entities to prepare projects worth R96 billion in areas that include student accommodation, social housing, telecommunications, water and sanitation, and transport.
"Government will make an initial investment of R1.8 billion in bulk infrastructure, which will unlock seven private sector projects to the value of R133 billion," Ramaphosa said.
Recovering from the strike
SEIFSA CEO Lucio Trentini told Fin24 on Friday that the 2021 steel and engineering wage deal gave the steel and engineering sector a two-and-a-half year reprieve from the instability that comes with industrial actions and turbulent talks, giving the sector room to focus on infrastructure.
"Last year it was settling the strike that brought the sector to its knees. In October, our industry wage talks collapsed, and we had a three-week strike. Thankfully, with a lot of understanding and compromise, we brought that to an end and have a two-and-a-half year window of industrial peace and stability," says Tentini.
Trentini says SEIFSA welcomed Ramaphosa's call for a comprehensive social compact, and it agrees with sentiments, vision and hopes that the president spoke to - but for now, it wants delivery, implementation and action, specifically in relation to the promised infrastructure spend.
Trentini said the R133 billion alluded to at SONA - if this materialises - will make a substantial and material difference to employers and employees in the metals and engineering industry.
"We are also grateful that he highlighted the importance of the Steel Master Plan (SMP). This initiative is probably the most important intervention in our sector under the current administration and we're completely behind the goals and objectives of the SMP, namely localisation, designation, buy SA, without compromising on quality and price," Trentini says.
Trentini refers to the SMP in Minister of Trade Industry and Competition Ebrahim Patel's portfolio, which seeks to assist local companies in the sector weather the impact of commodity price instability and cheap imports.
An analysis summary in the SMP says the price of long steel has been depressed to below import prices by competition for commodity products, with the price of hot rolled coil based on a basket of prices from other countries.
"Initial studies of the price of steel to downstream converters and users indicate that the steel price from the primary producers is not always the reason why costs of downstream users are high. Margins are taken along the value chain.
"Further price studies are urgently required and should be carried out for the Steel Oversight Council as a priority, to ensure that the industry correctly targets the factors leading to uncompetitive steel prices," the master plan reads.
Trentini says downstream fabricators face challenges in the price of steel and that shutting down upstream primary steel producers was not the solution.
He stresses that international experience has shown where primary producers close down and local fabricators rely solely on imported steel, the price of steel will eventually rise.
"This is a complex matter, and the solutions are not one alternative or the other, rather a combination of a number of factors. Steel must be fairly priced, readily available and the relationship between upstream and downstream requires some attention, and that is where the SMP can play a role," he says.
Trentini says lifting the national state of disaster would help get the sector back into recovery. With the upswing in economic activity, he says "there is no question that we will have to employ more people". The FIFA World Cup stadium construction is an example of the cooperation that is possible in this area, he adds.
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