Patel promises support programme for new plant and equipment for foundries and steel mini-mills

Measures to enable the local beneficiation of scrap metal will also be included.

The new Trade and Industry and Economic Development Minister Ebrahim Patel has promised to launch a support programme for new plant and equipment, specifically mentioning the development of foundries and steel mills. The promise came during his first budget speech to the National Assembly as the new minister.

“The President announced in SONA that we will develop a number of Master Plans to help create conducive conditions for industries to grow. This will include assisting companies to improve their industrial capacities and sophistication, focusing more on export orientation, and reclaiming domestic market space lost to imports. A key constraint to growth is electricity pricing. We are working with Ministers Mantashe and Gordhan to lower the cost structure of Eskom for more affordable electricity tariffs, particularly for priority sectors, which need to be boosted to create jobs and inclusion. The Master Plans will be action-oriented, implemented through working with business and labour and implemented in stages, so that we can move immediately,” said Patel.

“In the steel industry, we will this year launch a support programme for new plant and equipment in metal fabrication. We are meeting investors on the development of foundries and steel mini-mills, including measures to enable beneficiation of scrap metal. We will make the R1.5 billion Steel Industry Competitiveness Fund more attractive and easier to use,” Patel continued.

The Downstream Steel Industry Competitiveness Fund, administrated by the IDC, became effective on 7 June 2017, and was established to support domestic metals manufacturers facing import competition. It was also seen as a way of partially offsetting the effect of government’s decision to raise tariff protection on primary steel products produced by ArcelorMittal South Africa.

The incentive is available to existing downstream steel manufacturers seeking to improve their competitiveness, as well as those companies in distress with bankable turnaround strategies. Start-up enterprises and early-stage technologies and prototypes are also considered on a case-by-case basis.

The fund was created using a R95 million grant from the Economic Development Department, which was to be disbursed to the IDC, in three tranches, from 2017/18 to 2019/20.

The development finance institution is using the grant to leverage a larger R1.5 billion incentive that is extended to eligible beneficiaries as a subsidy against IDC’s normal interest rates.

Scrap beneficiation
No details were given of the plan for scrap beneficiation. In June 2019 it was gazetted that the Price Preference System had been extended. South Africa exports significant quantities of scrap metal, a major feedstock for foundries, steel mini-mills and even some large steel mills, with some scrap dealers appealing the department’s directive that it be offered to local producers in the first instance, but the Constitutional Court rejected an application for leave to appeal.

Steps taken to improve domestic scrap availability have, over the years, been broadly supported by scrap consuming industries, but resisted by scrap metal recyclers.