Industry's Progress Halted: Urgent Need for a Fresh Industrial Agreement

Industry's Progress Halted: Urgent Need for a Fresh Industrial Agreement

South Africa's Steel and Engineering Sector: Time for a Reboot

A candid look at our troubled industrial sector by Elias Monage, President of SEIFSA

South Africa's once-thriving steel and engineering industry now finds itself at a crossroads, grappling with years of deindustrialisation, diminishing production, job losses, and weakening competitiveness. The story isn’t one of chance, but a culmination of policy flaws, lack of coordination, and inadequate implementation. The 2021 introduced Steel and Metal Fabrication Master Plan (SMP) offered a glimmer of hope, aiming to reposition our steel industry at the heart of South Africa's reindustrialisation strategy. But, four years down the line, the question looms large: has the Master Plan delivered, or has it caved under the weight of unfulfilled promises?

The SMP's core principle remains solid. Comprehensive, coordinated, and well-resourced industrial policy is crucial in safeguarding key sectors. The pitfall lies in execution. Instead of clarity and action, we've seen diffusion and inaction. With over 20 workstreams and 73 deliverables, the SMP suffered from a lack of focus. As progress stalled, industry leaders began to grow disillusioned, questioning government’s commitment to deliver on pledges.

Today, the warning signs are unmistakable. Steel production remains 18% below its 2007/8 peak, and capacity utilisation across sub-sectors has fallen below the 85% benchmark for efficiency. Per capita steel consumption has plummeted by 37% since 2013, contrasting sharply with global trends where steel intensity continues to rise. These trends highlight factory closures, job losses, and the wane of crucial productive capacity.

To reverse this trajectory, we've got no choice but to radically rethink South Africa’s industrial policy. Government needs to acknowledge that past interventions, however well-intentioned, haven't yielded the desired impact. This moment demands a bold shift - from fragmented policies and departmental silos to a unified national compact anchored in public-private collaboration.

So, what should this new approach look like? First, we must design a Strategic Agreement for Impact between government and the steel and engineering sector. Crucially, this deal must bind both parties to a shared vision with clear accountability, defining a singular, measurable objective - such as achieving 4 to 5% annual growth in metals and engineering output - against which all policy instruments and initiatives can align.

Without a clear objective, no policy can thrive.

Second, we need to streamline efforts into three focused workstreams: Industrial Policy, Demand Creation, and Financing.

The Industrial Policy Workstream should aim to establish a coherent framework balancing competing interests across the value chain - from basic producers to manufacturers.

The Demand Creation Workstream needs to unlock projects that catalyze domestic steel consumption. This includes leveraging state-led infrastructure initiatives, strategic procurement, and facilitating partnerships that convert project pipelines into real economic activity.

The Financing Workstream should address the chronic undercapitalisation of the sector. A reindustrialising economy cannot be built on weak balance sheets and ad-hoc funding. A structured financial framework is required - including public-private funding vehicles and targeted incentives - to finance projects boosting multiplier effects across the economy.

Third, we must shift our approach to policy from punitive to incentive-based mechanisms. Businesses require predictability and support to invest and grow. Every policy instrument necessitates rigorous cost-benefit analysis, with those that fail to deliver being scrapped, and those that do being scaled up. Industrial policy should evolve into an iterative, evidence-based practice - not a once-off, static document.

Fourth, we require government to lead a national policy unification drive. Energy security, rail logistics, port capacity, and trade policy are all levers of industrial competitiveness. At present, these levers pull in different directions. Cooperation and consistency across departments and spheres of government are essential. The private sector cannot be expected to invest in an economy where the left hand of government doesn't know what the right hand is doing.

Finally, it's critical that we reaffirm the strategic importance of the steel and engineering sector to South Africa's future economic prospects. No nation can industrialise - or reindustrialise - without a robust metals sector. Steel serves as the foundation input for mining, construction, transport, manufacturing, energy, and agriculture. The erosion of this sector undermines every other sector's growth potential.

The SMP, while full of promise, has not lived up to its potential. We must salvage its original intent - to galvanise industry and government behind a shared industrial vision - and breathe new life into its structure and implementation.

SEIFSA and its members remain prepared to work together on a new compact for industrial growth. We call on government, particularly the Departments of Trade, Industry and Competition; Finance; Public Enterprises; Infrastructure; and Transport, to urgently come together with industry leaders to forge a new path forward. With every passing year of inaction, the socio-economic consequences deepen - more job losses, more factory closures, and a more profound erosion of South Africa's productive capacity.

Let us unite around a Strategic Agreement for Impact between government and the steel and engineering sector, sharing a singular commitment: to reignite South Africa's industrial engine and build a future of inclusive, job-rich growth. The steel sector - and South Africa - depends on it.

1. The comprehensive, coordinated, and well-resourced industrial policy advocated in the Steel and Metal Fabrication Master Plan is vital for safeguarding key sectors like South Africa's steel and engineering industry.
2. The lack of focus and clarity in the execution of the SMP has led to industry leaders questioning the government's commitment to delivering on its pledges.
3. The declining steel production, falling capacity utilisation across sub-sectors, and plummeting per capita steel consumption indicate factory closures, job losses, and a wane of productive capacity.
4. To reverse this trend, South Africa's industrial policy needs a dramatic overhaul, moving from departmental silos to a unified national compact anchored in public-private collaboration.
5. The new compact should consist of a Strategic Agreement for Impact, defining a clear objective like achieving 4 to 5% annual growth in metals and engineering output, and focusing on three workstreams: Industrial Policy, Demand Creation, and Financing.
6. The Financing Workstream should address chronic undercapitalisation by establishing public-private funding vehicles and targeted incentives to finance projects boosting multiplier effects across the economy.
7. A reindustrialising economy cannot prosper without addressing levers of industrial competitiveness such as energy security, rail logistics, port capacity, and trade policy, requiring cooperation and consistency across government departments.

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