It is said that ‘metal fatigue’ is the progressive and localised structural damage that occurs when a material is subjected to cyclic loadings. The Encyclopedia of Tribology defines ‘cyclic loading’ as the application of repeated or fluctuating stresses, strains or stress intensities to locations on structural components, with the degradation that may occur at the location being referred to as ‘fatigue degradation’.

In the instalment of this column published on May 13 – yes, it was a Friday – under the title ‘The industry of steel – to reboot or to boot?’, I dealt with the proliferation of steel customs tariff applications and also touched on the ownership of steel companies. In case you missed that article, the customs tariff applications were predominantly brought by members of the South African Iron and Steel Institute (Saisi) , including ArcelorMittal South Africa, or AMSA (formerly Iscor), Cape Gate, Columbus Stainless, Evraz Highveld Steel & Vanadium and Scaw Metals Group.

As I stated in the article, of AMSA’s shares, about 54% are held by foreign investors, including the ArcelorMittal group, with a 47% interest, while the largest domestic shareholders are Investec Asset Management, with an effective shareholding of 9.7%, the Industrial Development Corporation (IDC), with 8.8%, Coronation Fund Managers (6.9%) and the Public Investment Corporation (6.0%). AMSA has 24 172 registered shareholders. Cape Gate is a family-owned company, while Columbus Stainless is 76%-owned by Acerinox, of Spain, with the IDC controlling 24%. Evraz Highveld Steel & Vanadium – which is fighting to avoid liquidation – has Russian-controlled group Evraz as a 51% shareholder, with 34% of the company’s equity being held by the South African empowerment partner, Macrovest. Scaw Metals Group’s majority shareholder is the IDC (74%), with an empowerment consortium holding 21% and an employee share ownership plan trust the remaining 5%.

So, in essence, these companies tend to be foreign-owned entities, which could partially explain government’s interest in establishing its own steel mill – Business Day reported on October 26, 2015, that the IDC had affirmed its commitment to building a $5-billion steel mill in the country. Interestingly, the IDC already has a substantial interest in the South African iron and steel industry.

Against this backdrop, Economic Development Minister Ebrahim Patel, in a notice in the Government Gazette of June 10, informed of the establishment of a committee of the International Trade Administration Commission of South Africa (Itac) to monitor and make recommendations to Itac with respect to the impact of the changes in import tariffs (also known as duties) applicable to the primary steel industry on downstream users in the steel industry; the pricing of the products of companies in the primary steel industry to downstream users and the steel industry, generally. This will include the commitments made by applicants for such changes in import tariffs and their impact on job creation and job retention; industrial output; investments in plant, equipment and skills; research, development, technology and economic investments; jobs in the full steel industry value chain; and import and export trends in the steel industry value chain.

The committee was established for a period of five years from June 10 and comprises 14 members referred to as either ‘Itac commissioners’ or ‘additional persons’ appointed for a period of 12 months. The ‘additional persons’ are representatives of Saisi; the Southern African Institute of Steel Construction, the National Employers Association of South Africa, the Steel and Engineering Industries Federation of Southern Africa (Seifsa), International Steel Fabricators, AMSA and the South African Coil Coaters Association. (Two Seifsa representatives serve on the committee, one as a commissioner and the other as an ‘additional person’.)

According to the Government Gazette notice, the committee will report to Itac at least biannually and will meet “for the despatch of business, adjourn and otherwise regulate their meetings as they think fit”.

As for the significance of this committee – this is not known. It is not expected that the committee’s observations (through its monitation) or its recommendations will be made public. Also, no sanctions, if any, are known that could, should or would result from the committee’s observations or recommendations as to the “commitments made by applicants for such changes in import tariffs and their impact on job creation and job retention, industrial output, investments in plant, equipment, skills, research, development, technology and economic investments”.

Personally, I find it fascinating that, despite a depreciating currency, which implies increased natural protection, a South African industry is not able to survive. This very industry has been identified to employ price practices referred to by certain commentators as import parity pricing and export parity pricing. As for the success of the established committee, only time will tell, but I would encourage you to manage your expectations. In an age of transparency, one would have expected the committee to at least prepare and publicly release a report of its biannual activities.

New Tariff Application Forms
In a notice in the Government Gazette of June 10, Itac, under the auspices of the Department of Trade and Industry (DTI), informed of its customs tariff amendment application forms. (Itac’s relation to, and interaction with, the DTI and the Department of Economic Development requires an article of its own.) According to the notice, Itac has revised its customs tariff amendment application forms for an increase in the rate of customs duty, a reduction in the rate of customs duty and the creation of a rebate facility. Itac had previously amended the tariff amendment application forms to reflect the directive to Itac by Patel, which was published in Government Gazette of April 21. Applicants must submit their tariff applications by completing the new application forms, which are available on the Itac website.