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Cement and steel monopolies could hike prices

Apr 22 2012 13:15 Dewald van Rensburg

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Johannesburg – Government officials are seriously concerned steel producer ArcelorMittal SA (Amsa) and other large companies will inflate the cost of government’s infrastructure projects.

This fear resurfaced at an infrastructure conference last week.

South Africa’s industrial plans depend largely on local preferential procurement for infrastructure, but many speakers warned that this procurement could be exploited by large companies owing to the lack of competition.

Dr Paul Jourdan, who co-authored the ANC’s recent policy document on state intervention in the mining industry, said that virtually the entire construction value chain is subject to “monopolistic pricing”.

In his inaugural address, international economist Professor Joseph Stiglitz warned against “distorted” partnerships with the private sector where the state carries the risk while private groups profit.

Various speakers pleaded that alleged import-parity pricing on essential inputs such as steel and cement should be avoided.

Monopolistic practices in the supply chain cannot be tolerated, said department of trade and industry deputy director general Nimrod Zalk.

The country would benefit from the creation of competition for Amsa, said Eskom CEO Brian Dames.

The department of trade and industry has for years unsuccessfully attempted to negotiate a “development steel price” with the steel giant and is increasingly speaking of government funding a second steel producer.

Stewart Jennings, who chairs industry body the Manufacturing Circle, however said the solution is not to create a second steel producer.

What is needed, he said, is scale. Amsa does not make money. A second steel group will not make money either.

Increased competition would simply not be good for big business – the local economy is too small, he warned.
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