The closure of Arcelor-Mittal’s long steel operations in Newcastle and Vereeniging has dealt a devastating blow to the economies of both towns, putting up to 3,500 jobs at risk.
The company has cited several reasons for the closures, including the current energy crisis, the collapse of South Africa’s logistics and transport infrastructure, the ban on scrap metal exports, and the 20% export levy.
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Melanie Veness, the chairperson of the Association of South African Chambers (Asac) and CEO of the Pietermaritzburg and Midlands Chamber of Business, expressed her sadness at the situation.
She emphasized that the unfavorable business environment in South Africa, characterized by escalating electricity prices, frequent load shedding, a failing logistics system, and poor economic growth, has made it difficult for energy-intensive businesses to trade.
Veness stated, “You cannot make conditions impossible to trade in and then be surprised when businesses fail.” She further warned that unless the government allows the private sector to intervene in fixing Eskom and Transnet, addresses safety and security issues, improves service delivery, and rethinks anti-growth policies, more businesses will suffer the same fate.
Siboniso Duma, the KZN MEC for Economic Development, Tourism, and Environmental Affairs, acknowledged the significant contribution that ArcelorMittal of South Africa has made to the local municipalities’ revenue base and job creation.
He assigned the acting CEO of Trade and Investment KwaZulu-Natal, Sihle Ngcamu, to address the matter and allocate resources as part of the business retention and expansion strategy.
Duma stressed the importance of saving jobs at the steel company, especially considering the already high unemployment rate due to the economic impact of Covid-19.
He also acknowledged that the decrease in demand for steel, partly attributed to cuts in infrastructure expenditure, has been a challenge for ArcelorMittal of South Africa. The department continues to collaborate with all levels of government to ensure infrastructure rollout.
ArcelorMittal South Africa, in a statement, informed shareholders about the efforts made to ensure the long-term viability of the Newcastle Works and the broader long steel products business.
Despite implementing cost-saving initiatives, raw material cost savings, and productivity improvements, the company was unable to counter the challenges it faced.
The winding down of operations can be attributed to various factors, including a slow economy, a difficult trading environment, and low market demand in key steel-consuming sectors.
National constraints such as high transport and logistics costs, energy prices, and the ban on scrap exports have also contributed to the company’s decision.
Kobus Verster, the CEO of ArcelorMittal South Africa, expressed the company’s commitment to ensuring long-term sustainability. He stated, “As difficult as these circumstances are, we have a duty to ensure that the business remains sustainable in the long term, in the interests of the company and its stakeholders.
The remaining business, after the wind down, will be on a more sustainable financial footing and be able to invest the appropriate capital in product development and available growth prospects.”
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The closure of Arcelor-Mittal’s steel operations in Newcastle and Vereeniging is a significant blow to the local economies and the livelihoods of thousands of workers.
The challenges faced by the company highlight the need for government intervention and support to create a favourable business environment, address infrastructure issues, and stimulate economic growth in the energy-intensive industries.
