Steel master plan proposes development fund to support critical projects

Steel master plan proposes development fund to support critical projects

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THE steel master plan 1.0, a joint initiative by regulators, industry and labour, has proposed the establishment of a Steel Industry Development Fund to support critical industry projects as one of the measures to revive the steel industry’s fortunes.

The fund will be established with funding sourced from a small levy on all primary steel sold in South Africa, according to the plan.

Speaking at the signing ceremony of the steel master plan, in Germiston, east of Johannesburg on Friday, Minister of Trade, Industry and Competition (the dtic) Ebrahim Patel said the finishing touches were being done on the modalities of the fund.

“The idea is that the steel development fund will be run effectively by the industry. It will be a resource that is available to help promote the long- term interest and future of the sector,” Patel said. The aim was to avoid another bureaucratic arrangement.

“I said to the facilitator at the start the money should not come into the government, that is not the ideal place, you need a more flexible instrument so the industry can see where the money is being deployed to,” said Patel.

The fund comes on the back of a R1.5 billion downstream steel development fund that was established by the government through the Industrial Development Corporation. In addition the dtic industrial funding branch was also developing a metal fabrication fund.

A co-ordinated effort at reviewing input costs including coal, ore, rail scrap and electricity, has also been proposed as a measure to ensure the industry’s sustainability, according to the steel master plan.

“We need a cheap and secure source of energy. Part of the master plan is an engagement with Eskom to find ways of doing that,” said Patel, adding green energy was also an important element of the master plan. According to the master plan, numerous producers have said it costs more for them to transport products from Gauteng to the Durban port than bring goods ex-works from Asian exporters or elsewhere in Durban.

South Africa is one of Africa’s largest steel producers and, according to the World Steel Association, domestic manufacturers produced 5.7 million tons of crude steel in 2019, only second to Egypt on the continent.

However, South Africa’s production steel volumes and its share of gross domestic product have declined mainly on the expansion of China’s steel output. The rising electricity costs and the import parity pricing of raw materials including iron ore, coking coal and chrome have also been a challenge to the industry.

The Covid-19 pandemic has exacerbated challenges faced by the steel industry, both primary steel producers and the downstream industry. The Steel Master Plan focuses on investor confidence by creating long-term policy certainty.

Patel said stimulating demand and improving competition was a better engine than the use of tariffs

“If we over rely on tariffs, what we do is take away innovation and competitiveness,” he said.

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