South African industrial giant should be allowed to shut down business unit

The government should allow ArcelorMittal South Africa (AMSA) to close its long steel business, with its interventions resulting in it throwing good money after bad and negatively impacting the local industry. 

This is feedback from the CEO of the National Employers’ Association of South Africa, Gerhard Papenfus, who said the government’s interventions are one of the main reasons why AMSA ended up in this situation in the first place. 

AMSA first announced plans to close its long steel business in 2023, with it threatening 3,500 direct jobs and up to 100,000 indirect employment opportunities.

In an attempt to save AMSA’s long steel business, the government has given it billions of rands in working capital and imposed import duties and safeguard tariffs on cheap imports from Asia. 

Since June 2024, AMSA has been provided with a R1 billion working capital facility from the Industrial Development Corporation (IDC), a R380 million IDC and government shareholders’ loan, another R1.683 billion IDC facility and R417 million UIF funding. 

The company also benefits from extensive and steadily increasing import and safeguard duties, to protect it from cheaper imports.

Despite this support, on 14 July 2025, the company confirmed its plans to shutter its long steel business by the end of September 2025. 

It said that limited progress has been made in addressing the main structural impediments to its business’s sustainability.

Papenfus said this shows that throwing money at the problem never was, and will never be the solution to AMSA’s problems. 

“Nobody disputes the fact that a proficient and cost-effective primary steel producer is an asset to a country’s economy,” Papenfus said. 

“However, the pertinent question that needs to be asked is, at what stage does a country’s primary steel producer become a liability, when a country must then rather allow for market powers to dictate whether that primary steel producer has a continued right to exist?” 

The measures taken by the government to protect AMSA have had unintended consequences on the broader steel industry in South Africa. 

They have limited the local industry’s ability to access cheaper steel to drive down costs and improve supply to the southA frican market. 

AMSA has blamed the weak local steel demand and consumption as a major contributing factor to its downfall, together with so-called cheap imports. 

However, what it fails to admit is that its own inability to supply steel or to do so at affordable pricing, while effectively preventing its customers from importing, are major contributors to the decline of its own customer base, Papenfus said. 

Thus, while these protectionist measures kept AMSA alive, they simultaneously eroded its customer base, which threatens the company’s continued existence.

Industry will survive without AMSA

The collapse of AMSA has the potential to significantly impact local industries, with downstream manufacturers being particularly affected. 

Although it may prove challenging to operate optimally without the primary steel producer, this is a challenge which the industry will have no choice but to overcome, because, at the current rate, AMSA is no longer a long-term option. 

“The longer the AMSA corpse is propped up, the quicker the downstream will wane. So, the longer it takes for the inevitable to realise, the less of the downstream will survive,” Papenfus said. 

“The point is this: AMSA cannot survive without the downstream, and the downstream cannot survive with AMSA – at least not in the current regime.”

For the downstream industries reliant on steel as an input to survive and prosper, they need a reliable provider of affordable, high-quality steel. This is something AMSA has failed to provide for years. 

In any event, the mini-mills will remain, which will, at least to some extent, fill the gap left by AMSA’s absence, with the remainder can be made up through imports. 

“It is extremely economically naive for a government to interfere and control an industry where the various role players, with vastly different and competing interests, would create a natural economic equilibrium on their own,” Papenfus said. 

A fundamental issue is also that money given to AMSA will not help it survive, and heavy industry, more generally, to succeed in South Africa. 

Heavy industry in South Africa has traditionally been supported by the government through financial assistance, preferential tariff structures for basic services, and efficient access to the country’s ports. 

This has changed with Eskom and Transnet’s deteriorating performance. Not only did this hamper the operations of heavy industry, but also pushed up costs significantly. 

South Africa’s electricity price has risen by over 500% in the past ten years, greatly increasing the cost of operations for heavy industry. 

On the other hand, Transnet’s inefficiencies have prevented heavy industry from getting their products to market and hampered access to supplies needed to manufacture those products.

These structural constraints will not be resolved by giving AMSA more money or increased protection from foreign imports.