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CHAIRMAN’S REPORT
The varied activities of SEIFSA over the past year are detailed in the Chief Executive’s Report. I would like to highlight briefly some of the Federation’s key activities over the past year and identify some of the immediate challenges facing our businesses. The metals and engineering sector remains a strategic sector of the general South African economy. This sector has important direct linkages with both the primary and tertiary sectors of the economy. The Steel and Engineering Industries Federation of Southern Africa (SEIFSA), through its representation of over 20 Industry Associations in this sector, has provided active support for these Associations and lobbied for policies that seek to improve the business environment in which its members operate. SEIFSA’s key focus has always been on building strong employer associations reflecting the views of their respective memberships and supporting the needs, interests and transformation objectives of responsible employers in the industry. There is little doubt that during the period leading up to and beyond the 2014 wage negotiations, SEIFSA raised the public profile of the metals and engineering sector to levels never seen before. There is now recognition from both government and labour that SEIFSA is a reliable partner to assist with navigating our economy through the changing local and global economic landscapes.
BUSINESS AND ENVIRONMENT
ECONOMIC
The metals and engineering sector truly experienced an annus horribilis over the review period. At the time of the AGM last year, we had just seen the end of the series of disruptive strikes and were hoping for recovery during the year ahead.
SEIFSA ANNUAL REVIEW 2015
However, the reality turned out to be quite disappointing. Though unexpected at the time, the financial crisis of 2008/9 was nevertheless a total game changer, the small domestic metal sector revival around the World Cup activities was short-lived and the labour, electricity and international demand disruptions during 2014 threatened to be the proverbial last straw breaking the camel’s back. Over the last year, metal sector production declined by 3,9%, profit margins dropped by 27%, employment declined by between 10000 and 16000 (and may continue to slide during the second half of 2015), fixed investment by the sector contracted by 16% and imports surged, leading to a sector trade deficit of R30 billion. What does the future hold? Answering this question is not simple and it is useful to look at the short and longer term separately. The short term is mainly about unfair competition from highly-subsidized Asian economies, which resulted in accelerated import penetration of their products into the South African market over the last year. This holds true for many producers over the whole spectrum of metals and engineering sector products. The protection measures already approved and others in the pipeline for basic steel producers will help, but these will not be enough. Primary steel producers are in such distress that short-term downscaling is unavoidable. South African production costs (for various reasons) are higher than the lowest cost quantile of producers in the world, who are simply overrunning our market. Protection seems to be a choice between losing the entire sector (as happened more or less in
