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Polity
Article by: Sapa
Published: 03 Sep 2010
Govt will intervene on steel price — Davies
Government is intent on using policy tools to achieve competitive steel pricing to benefit downstream industries, Trade and Industry Minister Rob Davies said on Thursday.


"Our research, our analysis now is telling us that there were obligations and we are going to ensure that those obligations are fulfilled. That is basically what we are looking at in our task force, identify the possible options."

 

The Minister, who spoke on the sidelines of a press briefing that saw renewed calls from Mmbers of Parliament (MPs) for regulation, declined to say what form of intervention the State would choose.


He said that an interministerial task team has found that developmental goals for the steel industry were fundamentally undermined by enshrining them in contracts with Kumba Iron Ore and ArcelorMittal.

 

The weakness has been highlighted by the ongoing dispute between the two protagonists, which is now subject to arbitration.


"We believe that the unbundling of Yskor in 2001... embedded two very important developmental objectives and the first one was that a proportion of all ore which is mined at Sishen is made available at cost plus three percent to support competitive steel manufacturing in South Africa.


"And the second one was that the beneficiary... would be required to pass that on in the form of a competitive steel price for downstream industries that use steel.

 

"The weakness that has probably emerged is that those obligations were entrenched in contracts between two discreet companies and those contracts then became the subject of dispute."


The task team, grouping officials from trade and industry, economic development and mining, was looking at how government could "reinstate those developmental obligations".


"I am not prepared to say what we are going to do, what leverage we are going to deploy but as I said we are going to identify the levers that we have to ensure that we get the public and developmental objectives on a higher ground," the minister added.


His remarks came after Louise Fubbs, the chairperson of Parliament's portfolio committee on trade and industry, announced that she would call public hearings to "interrogate" ArcelorMittal and other industry players, on the impact of steel prices.


Fubbs said she was not expected to wait for the final recommendations of the task team as the situations was too dire.


"We take it so seriously this matter of irresponsible pricing, without justification, that we are now going to.... interrogate this in such a manner that industrialists, manufacturers who are feeling in industry and manufacturing the impact of this, will come and comment.


"We cannot wait as it were for the completion of the work of that task team. Good heavens, what will they get up to next? We have to arrest them in their tracks.


"They are making their millions without beneficiation at all," she said.


The committee will also call the Competition Commission to the hearings to comment on the conduct of the iron ore and steel sector.


DTI deputy director general Nimrod Zalk earlier this month said that ArcelorMittal had failed to pass on the benefits of the low-priced steel it received from Kumba Iron Ore to downstream industries and it was clear that "moral suasion" was not sufficient to change the situation.


Zalk said that policy tools under discussion include a mineral rights regime, competition policy and legislation, trade policy and steel industry investment to encourage competition.


Fubbs said that the committee was prepared to consider introducing legislation to force the main players in the industry to adhere to a developmental steel price.


She said the fact that ArcelorMittal was a multinational company posed no obstacle to doing so.


MPs have in recent weeks sharply criticised the department for allowing ArcelorMittal for the past six years to get away with prices that failed to meet the agreed developmental model. Fubbs's remarks came at a press conference where the committee released the outcome of its deliberations on government's 2010/11 Industrial Policy Action Plan (IPAP2).


She said that the action plan had been strengthened by an undertaking from Finance Minister Pravin Gordhan to release R20-billion in tax incentives for IPAP2 projects over the next five years.


Treasury spokesperson Kershia Singh said that the amount referred to regulations that were gazetted in July 23, giving effect to allowances for industrial projects legislated in 2008.


It was announced then that government had made available R5,6-billion over five years for incentives in aid of industrial policy objectives, which translates into R20-billion of additional deductions.