South African President Thabo Mbeki today (Friday) slammed import parity pricing, as applied by the country's steel and chemical industries, as “market failures” and said efforts are being made to address this.

“Discussions continue with the steel and chemical industries, in particular, to reach agreement on the issue of import parity pricing,” Mbeki said during his State of the Nation address in Parliament.

He added, however, that government has decided to avoid using legislation or regulations to resolve the situation.

Steel giant Ispat Iscor, which is currently in talks with the Department of Trade and Industry about establishing a 'development pricing' model for domestic steel users, this week said it has submitted all the necessary price-comparison information required by government, and expects to meet soon to finalise the new pricing formula.

Negotiations between government and Ispat Iscor were sparked by growing dissatisfaction from local steel users, who have accused the steel group of excessive pricing and abuse of market dominance.

The company also reiterated that, in any new pricing model, it would seek to apply the basic principle that steel prices, in a market economy, should be value- rather than cost-reflective.

In his speech in Parliament, Mbeki pointed out that there seems to be a growing consensus among economic role-players with regard to government's bid to remove the import parity pricing model.

“This is to ensure that, working with especially the producers of inputs that are strategic for economic growth, we find a resolution to this matter in a manner that addresses the interests of both these producers and the downstream industries,” Mbeki stressed.

In addition, the President also revealed that government has taken steps to better manage administered prices.

This, he said, would be achieved through the actions of independent regulators, as well as through more rigorous monitoring, which will see an administered price index produced by official statisticians from the first quarter of this year.

It is understood that government is currently probing administered prices in line with agreements reached at the Growth and Development Summit last year.

The research aims to quantify the impact of pricing and quality of services set through administered pricing mechanisms on investment and job creation.

It is focused on the transport sector, with specific focus on road, rail and ports; telecommunications; the water supply and distribution industries; the electricity supply and distribution sectors; municipal services, including refuse removal and rates and taxes; and fuel prices.