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ArcelorMittal South Africa snubs Patel’s expressions of interest for Saldanha

By Xolisa Phillip
Posted on Friday, 6 December 2019 12:36

A view of one of the largest steel producing companies in South Africa's industrial site close to the industrial port of Saldanha bay, South Africa, Saturday, March 8, 2008. (AP Photo/Schalk van Zuydam)

ArcelorMittal South Africa has rebuffed trade, industry and competition minister Ebrahim Patel’s bid for the company to sell its Saldanha steel plant. At least for now.  

Tami Didiza, ArcelorMittal South Africa’s general manager for stakeholder relations, confirmed on Wednesday that the department of trade, industry and competition “referred two expressions of interest in Saldanha […] to ArcelorMittal South Africa, the first dated 15 November and the second dated 30 November 2019.”

But “neither contains sufficient substance to assess commerciality,” said Didiza.

This follows a statement by the department and Patel on Sunday, which revealed receipt of the expressions of interest in the Saldanha plant by two parties.

In the statement, Patel implored Arcelor to work with the “government and other social partners to reverse this decision and find solutions which can keep Saldanha […] in operation, and its workers in employment.”

Yes, but …

Didiza said Arcelor is aware of the role Saldanha plays in the West Coast and the decision to wind down operations was not made lightly. Arcelor will “consider […] serious and viable commercial opportunities for […] the plant, especially if it means job losses can be prevented”.

This seems to suggest that what Patel and the department have placed on the table before Arcelor is less than enticing.

The stakes are high on either side.

The plant is the economic crown jewel of Saldanha, an idyllic seaside town in the Western Cape. Saldanha Works is the mainstay of the town’s economy and a key enabler of associated industries.

  • More than 500 jobs are on line at the plant, while its closure will spell disaster for more than a thousand people who rely on its supply chain.

Arcelor has initiated consultations facilitated by the Commission for Conciliation, Mediation and Arbitration to retrench workers at Saldanha.

Wind down continues

The company has started looking into the feasibility of relocating all or parts of the Saldanha steel-making melt shop and rolling mills to Vanderbijlpark in Gauteng.

It has also begun reviewing alternative applications for the site and surrounding land “to minimise the socio-economic impact on the community,” Didiza said.

Not enough carrot

Officials in Patel’s office have met with Arcelor’s management “to request the company to review its decision,” department spokesperson Sidwell Medupe said.

  • “The ministry advised that potential buyers were considering making a bid for the steel plant and requested […] [Arcelor] considers every effort to retain employment in Saldanha, including giving consideration to potential bids by other investors,” according to Medupe.

Patel’s department, the department of public enterprises, Eskom and Transnet have also engaged Arcelor’s management about support to its operations, with emphasis on Saldanha, “to reduce energy and logistics costs for the company”.

The government “facilitated engagements with iron ore and coal producers, as well as organised labour, to come up with solutions to reduce costs in order to avert job losses.”

Proposed solutions included concessions on iron ore pricing, electricity, water and rail tariffs.

But Arcelor “has asked for support […] in excess of what was made available,” according to Patel’s department.

Implications of Saldanha closure

The bigger picture for Patel includes:

  • South Africa is one of the only major primary steel-producing countries on the continent.
  • The African Continental Free Trade Area is expected to open up additional demand for primary steel across the continent, “as countries build the infrastructure and factories needed to take advantage of the expected increase in intra-regional trade.”
  • Patel’s department is developing a masterplan for the steel and metals value chain; initiatives are also being made to foster greater demand for steel by both the public and the private sector, as well as to improve the cost base across the industry.

No dice

Not convinced, Didiza said: “Unfortunately, the relief measures […] are not nearly enough and management needed to act quickly to give the company a chance to remain viable. In the absence of fair and competitive tariffs, the viability of the Saldanha operations is not likely to change in the hands of new owners.”

 

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