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Davies denies treating steel giant with 'kid gloves'

Cape Town – Government is trying to find a balancing act by protecting the downstream steel manufacturers while also ensuring the existence of a primary steel manufacturer, said Trade and Industry Minister Rob Davies.

Responding to Parliamentary questions on Wednesday about efforts to safeguard South Africa’s steel industry from the global glut as a result of oversupply of steel, Davies stressed that without a primary steel manufacturer, South Africa would digress to becoming a mere iron ore producer.

“Besides that, we won’t have the capacity at our ports to import all the steel needed for the downstream industries. So without a primary steel manufacturer there will also not be a downstream industry.”

READ: ArcelorMittal to pay R1.5bn price fix fine 

Davies' response came after a follow-up question from the DA’s Dean Macpherson who accused Davies of treating steel giant ArcelorMittal SA (AMSA) with “kid gloves” at the expense of downstream steel manufacturers.

In August 2016, AMSA agreed to pay a R1.5bn administrative fine for price-fixing in the steel industry. 

“You are protecting a monopolistic business that is increasing their prices to downstream manufacturers despite the tariff protection granted to them,” Macpherson said, “while the downstream industry is bleeding jobs because of AMSA’s pricing.”

(In 2015, the DTI approved a 10% ad valorem duty on some imported steel products on condition that steel producers didn’t increase prices that were subject to the duty.)

Davies responded that it is “nonsense” that government is putting the interests of one company above others. “There are tough choices to be made and we have commitments on pricing policy. That is not to say there will never be an increase in steel pricing.”

He reiterated that there are a number of measures in place to protect the steel industry in South Africa, such as a new R1.5bn steel fund to support downstream manufacturers specifically.

READ: Govt's new R1.5bn steel fund to help SMMEs - Patel 

“We need to find a balance between the interests,” Davies said.

Favourable electricity tariffs for manufacturers

In a separate question, Davies was asked if his Department is putting measures in place to reduce electricity costs for key manufacturing sectors and to ensure that the high municipal premiums that are added to Eskom’s tariffs don’t negatively impact on the viability of these companies.

Eskom is Eskom is currently proposing a 19.9% tariff increase, which would take effect on April 1 2018 if approved by the National Energy Regulator of SA (Nersa).

READ: Nersa and Eskom win appeal over interim tariff increase 

Davies responded that Eskom does offer short-term pricing structures for consumers to support economic growth, but added that the Department of Trade and Industry has argued that the beneficiaries of lower pricing structures should not only be heavy electricity users, but also be extended to labour-intensive and manufacturing industries.

“In order to address these issues, we are working with the relevant stakeholders to address the issues around electricity pricing and to provide a stable reliable source of electricity over the long term.”

Davies said whenever the Nersa has hearings on electricity pricing the DTI attends to make sure the concerns of the manufacturing sector is taken into account. 

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