The new year has begun on a bleak note for employees of ArcelorMittal South Africa (Amsa), as the steel major announced its decision to wind down its long steel business on the first Monday of 2025. This move threatens the livelihoods of approximately 3,500 direct and indirect jobs across Gauteng, Mpumalanga, and KwaZulu-Natal, with many workers likely still reeling from the news while on holiday.
Closure of ArcelorMittal South Africa’s (Amsa) Newcastle facility poses an existential threat to the local economy, with the town accounting for a staggering 34% (over R10 billion) of Amsa’s procurement spend in 2023, underscoring the facility’s pivotal role in sustaining livelihoods and businesses in the community. So, it is not farfetched to state that the shutdown may unleash devastating socio-economic consequences, echoing the catastrophic impact of Eskom’s Komati Power Station collapse in Mpumalanga.
The impending switch-off of ArcelorMittal’s long steel products division presents a pivotal moment for the South African government to reconsider its role in the steel industry. This situation highlights the challenges faced by the steel sector and offers a unique opportunity for the state to reclaim its manufacturing capabilities and foster economic growth.
However, a historical context suggests the chickens are coming home to roost.
Did the Neoliberal trajectory cook the goose for ArcelorMittal?
ArcelorMittal’s roots trace back to ISCOR, a state-owned enterprise that played a crucial role in South Africa’s steel production and created jobs. However, with political changes and the subsequent privatisation of ISCOR, the company’s fate changed dramatically.
The privatisation of ISCOR and the sale of its iron ore feed to Anglo-American, driven by widely-documented neoliberal policies of successive post-apartheid administrations, have crippled South Africa’s steel industry, exposing domestic firms to export vulnerabilities and ultimately leading to ArcelorMittal’s downfall, which now threatens thousands of jobs and underscores the flaws of prioritising corporate interests over national industrial development.
Time for Bold Action: Why GNU needs to intervene
The closure of ArcelorMittal’s operations presents a critical juncture for the South African government to reclaim its role as a strategic player in the steel industry.
For instance, by bidding for ArcelorMittal’s assets, the government can potentially revitalise the sector, breathe new life into its Black Industrialists programme, and reassert state control over critical manufacturing capabilities, whilst also displaying unwavering, serious commitment to drive domestic beneficiation of its commodities. This proactive move would not only stabilise the local market but also enable South African firms to compete more effectively against low-cost imports, thereby safeguarding the country’s economic interests and promoting sustainable industrial development.
At a key policy level, South Africa’s government of national unity (GNU) would not prefer to stand idle as the steel sector teeters on the brink of collapse. The ANC and DA, the major parties in the GNU, cannot afford to preside over the total demise of jobs and the steel sector. Terrible for optics.
Revisiting the Sovereign Wealth Fund
In August 2024, President Cyril Ramaphosa reaffirmed the government’s commitment to establishing a Sovereign Wealth Fund (SWF), which he stated would “benefit future generations.” The proposed SWF is envisioned as a state-owned enterprise (SOE) designed to accumulate resources for capital investment through a dedicated revenue stream and to allocate these resources across various asset classes, similar to the functions currently performed by state-owned pension funds. However, the President cautioned that the current economic conditions are not conducive to its immediate establishment, emphasising the need for a more favourable fiscal environment before moving forward with this initiative.
“The Sovereign Wealth Fund should be seen as a contributor to economic development and as a vehicle through which the state can invest money that is in surplus and can be utilised for various economic projects. It could be specific economic sectors that it focuses on and could also be funding, or surplus money utilised to invest in other countries and companies”, the President stated in his replies to MPs.
However, given the urgency of the situation at ArcelorMittal, could the state’s pension fund be leveraged to make a strategic investment, mitigating the impending economic and job losses crisis?
Match Made in Steel: The Jindal Investment Case
Meanwhile, with the iron ore assets at Anglo-American’s Kumba Resources currently tied up in merger talks with BHP, an alternative opportunity for the state lies in the Jindal Steel & Power iron-ore project in Melmoth, KwaZulu-Natal.
A strategic partnership between the South African government and Jindal Steel & Power, a global giant with $12 billion in assets, could be the catalyst for revitalising local steel production. Collaborating on the development of Jindal’s new iron ore mine in KwaZulu-Natal would not only attract significant investment but also tap into Jindal’s well-established expertise and resources to rebuild and enhance South Africa’s steel beneficiation capabilities.
It is crucial that community leaders, who have raised concerns about the project’s potential impact on graves and homes, are made aware of the potential benefits of this partnership.
Image: Business Day
By engaging in open dialogue and addressing concerns, it may be possible to find mutually beneficial solutions that balance the need for economic development with the importance of preserving cultural heritage and community interests
Firm Policy Foundations for Economic Diversification
By leveraging the National Industrial Policy Framework (NIPF) and its Industrial Policy Action Plan (IPAP) to diversify the economy through revitalising the steel sector, the government can create jobs and stimulate related industries such as construction and mining. This approach aligns with global trends emphasising sustainable practices and local sourcing, which can enhance resilience against international market fluctuations.
Resolute Policy Action and Bold Leadership
The closure of ArcelorMittal’s long steel division is a wake-up call for South Africa. It presents an opportunity for the government to reassess its industrial policies and take proactive steps towards reclaiming its manufacturing prowess.
By forging strategic partnerships with industry leaders like Jindal, South Africa can reclaim its lost competitiveness in the global steel market, while aligning its policies with those of its BRICS counterparts.
Moreover, in the face of rampant illegal mining, which has drawn intense global scrutiny, South Africa has a critical opportunity to reassert its moral authority and demonstrate its commitment to mediating between business interests and community needs.
This moment calls for visionary leadership and decisive action, which can reshape the future of South Africa’s economy, cultivating resilience and sustainable growth in an increasingly complex and dynamic global environment.
Editorial: info@esgfrontiers.co.za | @Lloydnedohe_ on X
