Jobs bloodbath warning for South Africa’s steel industry

South Africa’s steel and engineering sector is on the precipice of an unprecedented jobs crisis, as employment in the industry has declined significantly – with thousands more set to lose their jobs.

This is feedback from the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) COO Tafadzwa Chibanguza.

Chibanguza said the employment trends in the metals and engineering sector are an important indicator of the underlying structural constraints that have plagued the sector for the last decade and a half. 

The sector currently employs 362,871 people – a significant drop from the 577,507 people employed in 2008. This equates to a decline of 214,636 jobs, or 37.2%, representing a 2.9% decline per annum.

“Employment in the sector has decreased at double the rate production has decreased over the same period,” Chibanguza said. 

“Considering the steel sector’s induced economic multiplier of 2.7 times, the employment multiplier of 6 times and the dependency ratio of between 7 to 10 people relying on each formal job, the sector’s employment trends spell wide-scale social and economic disaster.” 

Chibanguza said the steel and engineering sector is crucial to South Africa’s economy as the “backbone of the country’s industrial base”. 

SEIFSA CEO Lucio Trentini has previously said that the challenges the industry faces have had a disastrous impact.

Trentini said South Africa’s steel and engineering sector is a strategic and important sector of the country’s economy. 

It consists of around 10,000 companies that employ over 220,000 blue-collar workers. It is a R900 billion sector, and its contribution to GDP is around 3%.

However, despite the sector’s far-reaching impact and diversified demand profile, Chibanguza said its innate potential is not being realised. 

This was shown when ArcelorMittal South Africa recently announced that it would shut its long steel products business and cut as many as 3,500 jobs. 

“The prospect of this development materialising is a major cause of concern, which will only add to exacerbating the downward spiral to employment in the sector,” Chibanguza warned.

He explained that this trend could see critical industries, such as construction, automotive, mining, and electro-technical, lack domestic supply. 

“The reliance of these downstream industries is not a preference question but rather higher quality and safety specifications,” he said. 

“Faced with the prospect of a lack of domestic supply, these downstream industries will have no alternative but to look to import their feedstock, which translates to the loss of much-needed domestic jobs, further deepening the unemployment crisis.”

SEIFSA estimates the employment losses could amount to 293,754 direct and indirect job losses.

“This is an outcome that South Africa, given its already untenable unemployment rate, can ill afford,” he warned. 

“Doing everything possible to find lasting solutions to averting the announced plant closures should dominate our and government agenda, failing which industry and the economy will be left to deal with a catastrophic socioeconomic jobs crisis of unimaginable proportions.”