The current discussions between government and the steel industry are focused primarily on striking the “appropriate balance between protection and competitiveness”, Economic Development Minister Ebrahim Patel told Engineering News Online in an exclusive interview on Monday. He added that the talks were being undertaken on an expeditious basis and that a new framework should be agreed within weeks.

Patel indicated that government was committed to sustaining the domestic industry, which had come under major pressure from imports as demand for steel declined in China.

“We need a steel industry and we need to support them during this period. But we also need a competitive industry that is able to provide products at prices that don’t significantly inflate the cost of the public investment programme, or render downstream users uncompetitive.”

Government had already approved increased tariffs on three steel products and was evaluating the case for extending protection to various other steel products, with several applications for the imposition of 10% duties currently before the International Trade Administration Commission of South Africa.

However, the industry and government were also deliberating on a larger package of measures to further improve conditions for the steel sector in the short-term, in return for investment, jobs and pricing commitments in the longer term.

“Our challenge as government is to do two things simultaneously: support the industry so it remains standing at the end of the storm; but to do it in a way that maintains competitive pressures – so that the sector doesn’t become even more insulated and even less competitive and becomes totally reliant on protection.”

The Minister lamented the fact that the industry had failed to remain competitive and nurture domestic customer loyalty during times of market strength.

“Frankly, I think, the sins of the past are coming home to roost. During the good times, some of the steelmakers underinvested in plant . . . and they also did not build, support and nurture local customers,” Patel said, arguing that customer loyalty might have acted as a buffer during the current downturn.

“The discussions with the companies are about finding the appropriate balance between protection and competitiveness – and competiveness measured by price. So it’s about trying to find appropriate pricing mechanisms.”

Patel also stressed that government understood the urgency of the situation, saying that the basic architecture should be “cracked within weeks”.

However, some of the measures, such as the raising of tariffs, involved formal processes that could not be circumvented.

Nevertheless, Patel was confident that there would be an understanding soon “about the shape of the industry, what its broad pricing philosophy will be and an assurance to downstream users that there will still be competitive pricing”.