Steel producer ArcelorMittal’s plan to cut 3,500 jobs in South Africa is only the start of more job cuts to come, as the country’s energy and logistics crises are making it almost impossible to operate profitably.
This is the view of Pietermaritzburg and Midlands Chamber and Business CEO Melanie Veness, who told SABC News that ArcelorMittal’s job cuts will have a ripple effect on the economy.
ArcelorMittal South Africa recently announced that it will shut its long steel products business and cut as many as 3,500 jobs, citing the country’s moribund economy.
The company said the unit will be placed in care and maintenance.
The Newcastle Works, the Vereeniging Works, and rolling facilities, which use Newcastle material as feedstock, will be affected.
“The ArcelorMittal South Africa board and management have reached this point after having exhausted all possible options,” CEO Kobus Verster said in the statement.
“We have a duty to ensure that the business remains sustainable in the long term, in the interests of the company and its stakeholders.”
Veness said, “It’s devastating for the towns involved, for the business community, and for South Africa as a whole to lose 3,500 jobs like this at a time when our unemployment levels are at astronomically high levels, and we don’t have the growth that could possibly absorb those jobs.”
She said each person affected by the job cuts supports an estimated ten other family members.
In addition, ArcelorMittal’s suppliers for these businesses will also be very hard hit. “So, it’s going to start a ripple effect throughout the economy,” she said.
Despite the devastating effects these lay-offs and any future job cuts will have, Veness said she is not surprised that these businesses had to cut jobs.
“We can’t say we’re surprised that something like this would happen, given the operating environment in which business is forced to operate currently,” she said.
“Having electricity prices at the level they’ve escalated to load-shedding and logistical crisis in the country, it’s a very difficult operating environment for business to try and function in.”
She said many South African companies are teetering, and ArcelorMittal’s lay-offs are only the start. ArcelorMittal is “certainly not an isolated case by any stretch of the imagination”.
The country’s electricity and logistics crises are putting current and future businesses at risk.
“When ships are bypassing our ports, and we aren’t able to get components in, and it’s stopping our manufacturing lines, and we have to fly stuff out at great cost, we’re not competitive,” she said.
“Then, the international companies that are considering allowing us to produce new lines in South Africa will think twice about that.”
“It’s affecting our potential and what’s currently happening in South Africa. If we don’t fix this stuff, we stand to lose now and in the future.”
The country has already seen the effects of its tough operating environment on big companies like Anglo American and Sibanye-Stillwater.
In October, mining giant Anglo American announced that it had begun cutting jobs at its head office in South Africa. Around 181 jobs could be lost in this process.
In the same month, platinum miner Sibanye-Stillwater also announced that it would enter into Section 189 consultations to retrench over 4,000 workers amid the company’s restructuring.
The company plans to restructure four of its mine shafts, which could risk 4,095 South African jobs.