• Designation under the Competition Act: Industry consolidation may be necessary along certain parts of the value chain. A targeted designation by the Minister under the Competition Act is proposed, which would enable discussions between industry stakeholders to help manage consolidation. Such designation would require very clear protocols on the objectives of collaboration and information sharing. A consolidation programme directed simply at a managed reduction of capacity (and jobs) may not be in the public interest, whilst one that is directed at securing a higher level of local production and import replacement together with higher efficiencies may offer a public policy benefit that justifies such designation in term of the Act. Some consolidation is likely to take place simply as a result of market forces, but that may lead to further de-industrialisation and a discussion of options is preferable. It is therefore in the public interest as prescribed by Competition law, the scope for exemptions on consolidation should the thoroughly assessed on a case by case basis. The Commission is concerned that certain types of consolidation may have adverse consequences on competition in the long term. For example, aspects of consolidation involving specialisation around different products and geographic markets would extremely be concerning. Such aspects would effectively impose permanent forms of market division on the industry, reducing and not enhancing competition. There is scope for exemptions or mergers on consolidation, and this has to be thoroughly assessed on a case-by-case basis. • Supply of scrap metal: Government has approved an export tax on scrap metal and other measures to help ensure the supply of affordable scrap metal to the domestic consuming industry. In addition, discussions between government and scrap dealers and consumers of scrap have been held to consider measures which can drive local beneficiation of scrap, while supporting the sustainability of the recycling industry. There should be an incentive for recyclers to beneficiate scrap further up the value chain than by simply melting it into ingots or billets for immediate export. • Consideration of input costs: Discussions with key suppliers to the industry (including for instance ore, coal, rail, electricity, scrap as well as the cost of capital etc.) are essential to improve the competitiveness of the industry. It is proposed in this Master Plan that a coordinated effort at reviewing input costs be undertaken, with the dtic bringing key parties together. • Improving intelligence and information: Information about production, costs, prices, margins and demand need to be collected to ensure the effective allocation of resources and support. Technical and research support to the Steel Oversight Council will be tasked with collating information on the industry. Work is beginning in key value chains to digitize production and demand information, to allow better inventory management and tracking and reporting of localization. • Capacitating and aligning key institutions: A number of agencies and institutions play an important role in supporting the steel industry. These include the SABS, NRCS, ITAC, SARS and the IDC. A strategic, industry-focused approach is being developed to ensure key agencies have the capacity to provide world-class service and support. The establishment of industry standards and the ability to deal with illegal and sub-standard imports are critical to the success of the industry. Further opportunities will be developed and implemented as the first phase of the plan has been implemented and as outcomes are evaluated. Some immediate steps have been taken already in anticipation of the Steel Master Plan, as interim measures. These include amendments to the regulations on scrap metal, following an initial restriction on exports, to ensure an affordable supply to local industry; and tariff adjustments for both primary and downstream steel products. The Master Plan builds on these and by setting out commitments from the industry, it provides a coherent and coordinated framework. The responses to the draft Master Plan show that the major stakeholders have already committed themselves to supporting the Steel Master Plan process and many of the institutional building blocks are falling into place. The Steel Oversight Council must build on this to recreate the confidence in the industry which is indispensable for it to grow and prosper.
6 The South African Steel and Metal Fabrication Master Plan 1.0
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