Following the Competition Commission publishing Guidelines on Collaboration last year, the South African Iron and Steel Institute (Saisi) has called on the commission to be proactive in reviewing and adjusting the guidelines to ensure this remains an effective intervention to move the local steel sector into economic recovery.
Although Saisi believes the guidelines better enable collaboration between competitors on localisation initiatives, the institute says it remains to be seen if the benefit to be derived will be worthwhile, given the prescribed administrative process and the exposure associated with the disclosure requirements.
Additionally, Saisi says, given the nonbinding nature of the guidelines on the commission, the Competition Tribunal and the Competition Appeal Court, businesses may also be sceptical, justifiably, about the degree or protection offered by the guidelines.
The institute explains that localisation imperatives contained in the Steel and Metal Fabrication Master Plan require businesses at all levels of the value chain to give serious consideration to the opportunities presented by the guidelines.
The guidelines state that, given the weak trading conditions and challenging export market, collaboration has become increasingly crucial for the survival of the steel industry.
Particularly, the Steel Master Plan deems consolidation of the industry urgent, as overcapacity in especially long steel products is leading to an imbalance between supply and demand.
“The structural overcapacity of long steel products, with prices which are low in global terms, means that all the plants are fighting for sales volumes to run their mills efficiently.
“Since profits are not possible through revenue, the focus is on cost reduction, but that has left many of the mills in a weak financial position. The industry should be allowed to discuss options under supervision and with conditions,” according to the Steel Master Plan.
In turn, the commission’s guidelines acknowledge that competitor collaboration may be required to help advance localisation initiatives and identified four types of collaboration and corresponding competition law compliance guidance.
These are the identification of opportunities for localisation initiatives at industry level; the process of setting industry local procurement targets; the process of setting individual company local procurement targets; and demand forecasting.
The commission prescribes that the sharing of information must be facilitated by an independent third party to allow for information to be aggregated and eliminate the risk of collusion; that competitively sensitive information relating to prices, customer lists, production costs, quantities, turnovers, sales, capacities, marketing plans and technologies not be shared during collaborations; and that meetings between competitors be minuted and notified to the commission within reasonable time.
Notably, the commission, as well as government policymakers, may request access to the meetings’ recordings or minutes at any time.
Hence, Saisi’s concern about the prescribed administrative process and the exposure associated with disclosure requirements. Saisi hopes the commission will continue to consider what is best to move the steel sector towards increased investment, increased job creation and economic growth.