IDC and Scaw Metals on DA’s hit list

Scaw Metals spent R176 million (FY15: R288 million) on capital expenditure during the period to maintain, improve and expand production capacity.

The Industrial Development Corporation (IDC) should dump Scaw Metals and Foskor as they are “albatrosses around its neck”‚ the Democratic Alliance said recently.

“It has emerged that the IDC’s profits fell by 87% from R1.65 billion in 2014/15 to R223 million in 2015/16‚” said the party’s Michael Cardo.

He said steel producer Scaw‚ “which is 74%-owned by the IDC‚ posted a loss of R1.1 billion‚ while the agrochemicals group Foskor‚ which is 59%-owned by the corporation‚ lost R568 million.”

Cardo wants the IDC summoned before Parliament’s portfolio committee on economic development “so that it can account for its financial losses and present a turnaround plan.”

“We cannot afford to have it go the way of South Africa’s other public enterprises‚ which are money-guzzling sinkholes‚” he said.

It was time “for the entity to rid itself of Scaw and Foskor. They are albatrosses around the IDC’s neck. Several parties have already expressed interest in purchasing Scaw‚ following the IDC’s call for expressions of interest in October last year. Almost a year on‚ the IDC needs to report back on progress towards a sale.”


Inside Scaw’s Union Junction foundry

IDC CEO Geoffrey Qhena said several interested parties had already expressed interest in Scaw, or parts thereof, following its call for expressions of interest. Qhena said it was premature to offer a firm timeframe for the conclusion of a deal involving Scaw, saying only that there should be greater clarity prior to the start of the group’s next financial year.

Economic Development Minister Ebrahim Patel indicated that he had directed the group to ensure that it found ways of placing Scaw, as well as phosphate miner Foskor, on a commercially sustainable footing. Anglo American, which declared Scaw noncore in 2009, sold its 74 per cent stake to the IDC for R3.4 billion in 2012. Since then, the group has been buffeted by hostile market conditions, which have also rocked the entire domestic steel sector.

The other shareholders are Southern Palace, Izingwe and Pembani.

New R160 million high-volume moulding line commissioned
Markus Hannemann, CEO of Scaw Metals said in his annual report that: “The full year ended March 2016 has largely been a continuation of the tough trading environment experienced in the prior year.”

“Scaw recognised the need to adapt the business in line with a changing and increasingly competitive world. As such, we embarked on a group-wide restructuring process in August 2015, while continuing to invest in the future sustainability of the business.”

“As advances in production efficiency remain a priority, we commissioned a new R160 million high-volume moulding line. This investment boosts Scaw’s position as a global competitive manufacturer, particularly for foundry products.”

“The restructuring exercise is now complete. With a leaner structure, the business is better equipped to meet the challenges of a changing world.”

“Commodity prices have remained at unprecedented lows, impacting industries beyond the commodity producers. Slowing growth from China has dampened demand for all major commodities. With Chinese demand fading, the competitive dynamics of steel products have increased significantly, as Chinese producers upped their focus on exports. The turmoil of FY16 has certainly taken its toll on the industry.”

“Scaw’s business divisions reflected a mixed performance given the company’s diverse products and markets. Locally, private and public sector demand remained subdued, with few significant infrastructure projects coming into the market. The dire situation in the mining industry witnessed the curtailment of spend to the essentials.”

“Despite intense competition, Scaw has managed to retain its market share for the majority of its product range by offering a competitive combination of price and service levels to compete against imported products.”

“Transformation is one of the strategic pillars Scaw has identified as essential in developing a sustainable business.”

“The introduction of the stricter revised B-BBEE codes has seen many businesses regress from their level rating as they embraced the new requirements. Conversely, Scaw’s strong resolve and commitment has seen Scaw leap to an outstanding level 2 rating under the new codes.”

“Scaw’s training school and programmes continue to impart vital skills to our employees while additionally providing much needed skills and experience in the form of apprenticeship, learnerships and internships to some 482 youngsters.”

“In the broader social context, Scaw is committed to making a change. Our enterprise and supplier development programmes are of the highest quality and our improved B-BBEE level 2 rating bears testament to this achievement.”

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