11. Steel and fabrication master plan highlights of key policy interventions

As has been demonstrated in the report, the M&E sector in South Africa is in a recovery phase from the negative effects of COVID-19 lockdown measures.

SEIFSA has also taken note of the various policy interventions from the Government, accommodating some of the proposed areas as presented by SEIFSA above in its input process to the drafting the Steel Master Plan, which has since been launched.

Infrastructure drive: South Africa has a renewed focus on infrastructure, with the establishment of the Infrastructure Fund. The Office of the Presidency is managing the drive directly, providing an important impetus to growth.

Localisation: State-owned entities Transnet purchase significant quantities of steel products, such as rails. Transnet has committed to review their requirements and to work with the local industry on building local supply chains for large-scale projects and consumables. Commitment to promote localisation set out in the Nedlac Economic Recovery Plan covering the 2021 implementation of the localisation commitments made by social partners on the identified value-chains, including steel-intensive products for construction, tools and implements, household goods, capital equipment, transport auto, rolling stock and railway lines, based on a set of targets; a set of products; and champions at CEO level.

Export promotion: The African continent represents a significant opportunity for South African steel makers and downstream processors. African countries (excluding South Africa) purchase nearly R400 billion of iron and steel each year and promotion activities must focus on opening these markets for SA steel, while at the same time promoting local partners in those countries. The Master Plan proposes that consideration be given to combined and integrated efforts to promote exports, particularly to the rest of the continent – an approach described as South Africa Inc.

Development of industry value chains: key manufacturing and mining value chains offer an immediate opportunity for growth. The implementation of the Automotive Master Plan will increase the demand for locally produced metal components as OEMs pursue their localization commitments under the plan. Discussions are now underway between the auto industry and steel sector players.

Establishment of a Steel Industry Development Fund: establishment of a fund to support critical industry projects is proposed, with funding sourced from a small levy on all primary steel sold in South Africa.

Government funding: Government has established a R1.5 billion Downstream Steel Development Fund through the IDC to provide funding to the industry at concessional rates, and address weak balance sheets. A R200 billion loan guarantee scheme through the Industrial Development Corporation as part of the COVID-19 relief.

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.

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, industryfocused approach is being developed to ensure key agencies have the capacity to provide world-class service and support.

Trade policy support: Increase in the general rate of customs duty on primary steel products to 10% and safeguard measures on hot rolled coil and plate products. Tariff increases on a range of downstream products to the maximum bound rates allowed; trade remedies; deployment of rebates where products are not manufactured or additional value is added before export. SARS reference price system developed for steel products to address low-priced imports and inter-agency working group established to tackle illegal imports.

Scrap metal interventions: The longer-term intervention supported by the majority of stakeholders is for an export tax that will be implemented together with an ITAC permit system. The proposed export tax underwent a consultative and parliamentary process and its administration processes are being set up with an expected implementation date of July 2021.

Investment drive into the M&E Sector: a high-level survey of investments in the steel

industry was conducted. It indicated projects in the commissioning or construction stage, or where the investment is committed, to total R12,3 billion. Other planned projects, which in most cases are conditional on factors such as stable energy pricing and supply, regulatory permission and increased demand, total between R34 billion to R42 billion.

Electricity pricing support: Long Term Framework (LTF): The long-term NPA framework is targeted at large industrial operations that contribute to the base load electricity consumption and economic well-being of South Africa and require electricity price certainty for their operations. The intention is to provide qualifying consumers with access to a lower tariff for a period of up to 10 years, as the operation / sector would be unsustainable on the applicable standard tariff.

Flat steel pricing: Agreement on a set of principles for flat steel pricing in SA that is priced appropriately to ensure that steel dependent industries are competitive, while at the same time ensuring that the upstream steel mills remain sustainable and reviewed periodically. COVID-19 highlighted the risk and challenges of a single flat steel producer in South Africa which was unable to supply all of the demand in the domestic market when production restarted. Against this background, two steel producers have signalled their intention to produce flat products.