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Cape Town – Government will make a R1.5bn steel competitiveness fund available which will be administered by the Industrial Development Corporation (IDC), said Economic Development Minister Ebrahim Patel.
At a media briefing before delivering his budget speech on Thursday, Patel said the key purpose of the so-called Downstream Steel Industry Competitiveness Fund will be to assist qualifying manufacturers in the downstream steel sector to improve their competitiveness.
Qualifying companies include foundry industries, valve and pump manufacturers, machining plants and fabrication sectors such as those manufacturing pressure vessels, pipes and pipe fittings, and structural steel products and other steel-intensive businesses.
The fund will mainly target very small, small and medium enterprises, Patel said, but large enterprises up to a maximum annual turnover of R450m will also be considered, depending on their developmental returns.
In August last year, the Competition Commission imposed a R1.5bn administrative penalty on steel giant ArcelorMittal for price-fixing in the steel sector. The company agreed to pay the penalty over five years, starting from 2017 at R300m per year instalments.
Asked if the new steel competitiveness fund derives its money from the ArcelorMittal penalty, Patel said there’s no “direct relationship”, but the penalty and the fact that the money will be flowing in gave National Treasury more elbow room to make funds available.
The IDC will leverage a total of R95m, which it will receive in the form of grant funding from the Department of Economic Development.
The money will be made available to qualifying companies in the form of an interest rate subsidy to normal IDC risk pricing, Patel said.
South Africa’s downstream steel industries - particularly small and medium-sized enterprises - are under serious pressure due to a global steel glut, among other structural reasons. This has resulted in a number of company closures and job losses.
Patel cited figures from the Steel and Engineering Industries Federation of Southern Africa which estimates that there were 25 000 job losses and 500 small and medium company closures in the past year.
“The Competitiveness Fund,” Patel said, “will assist the sector to be placed on a sounder footing. “In this regard, the fund seeks to make a timely intervention in the form of a targeted downstream steel fund.”
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