South Africa’s diverse metals and engineering sector is in a critical state of regression. According to the latest State of the Metals and Engineering Sector Report for 2020/21, performance in this sector declined by 0.6% from 2018 to 2019.
Further to this, South African steel production capacity decreased from 7.6 million tons in 2010 to 6.3 million tons in 2018 – a 17% decline in 9 years. Reduced infrastructure spending due to steadily escalating steel manufacturing costs means that the production of steel for exports shrank by 7.9% in 2019, while local demand for steel has also diminished considerably. Exacerbated by a combination of a stagnant local economy, drop in global steel price and inconsistent energy supply, it is clear that the metals and engineering ecosystem is at a tipping point.
Though measures are being taken to resolve issues around current industry policy through Trade and Industry Minister Ebrahim Patel’s reconstitution of the Steel Committee and the development of a Steel Master Plan, changes to legislation will only come into fruition over the next five years. In the face of increasing uncertainty and a bleak forecast for 2020, what can be done now to revive the ailing steel industry?
Bridging the gap in the steel industry
According to Neil Reddy, Business Strategy & Projects Manager at Veer Steel Mills, bridging the gap in the steel industry requires essential short-term interventions geared towards entrepreneurial empowerment. This support is made possible by facilitating partnerships between governmental and private stakeholders.
“It is the responsibility of both government and public companies to create enabling environments for private business enterprises. A fundamental industry shift is required, and sustainable change can be achieved through championing small- and medium-sized steel manufacturers and suppliers. The steel industry creates 150,000 jobs nationally, and this number is bolstered through entrepreneurship.”
It is with this mandate in mind that Veer Steel Mills implemented Ubhoko, an entrepreneurial development programme focused on creating business opportunities and promoting economic growth and skills in townships.
“The nature of traditional steel industry practices disempowers SMEs. Through this initiative, we drive inclusion by developing a direct support and logistics network for customers living in informal settlements. We offer business development support by creating avenues of access to credit and funding and are currently putting structures in place to incubate potential entrepreneurs. This network challenges the norms and shortfalls of the industry in terms of participation, ultimately making the market more competitive as a whole,” says Reddy.
While the steel industry faces very serious challenges for 2020 and beyond, support is needed from all stakeholders to increase demand, ramp up production, attract investment and stimulate export opportunities. In order to weather the storm, close collaboration is required from government, public and private enterprises and SMEs within the steel industry to establish sustainable solutions.