GOVERNMENT INTERVENTION Government incentives have supported development in the automotive sector, and could similarly benefit the steel sector if implemented
Fasteners and aligned products manufacturer and supplier Impala Bolt & Nut MD Derek Cohen says attempts to protect the local steel market by introducing import tariffs have resulted in additional costs for small end-user businesses that are trying to remain viable in a difficult market.
He notes that the steel market is facing challenges such as erratic and volatile pricing – sometimes not in sync with international markets – exchange rate fluctuation, low commodity prices, and a lack of local and foreign investment in mining and infrastructure.
Although import tariffs might have been implemented to stimu-late support for the local steel industry, Cohen points out that these tariffs have proven to be an added burden for many downstream businesses.
“There are many traders, merchants and end-users that are forced to import at very high prices; while large end-users may have enough purchasing power to cope, smaller companies certainly do not.”
He explains that, in the current economic climate, companies like Impala Bolt & Nut must compete very strongly for the limited project work that is available, further noting that, if companies cannot secure a supply of raw material, they will have no choice but to import finished products.
“Although government interference is undesirable in a free market, steel manufacturing is certainly a strategic industry and, therefore, government intervention is required to promote downstream investment and employment,” he says.
He cites government’s efforts to incentivise the automotive industry to localise its procurement as an example of this, adding that Impala Bolt & Nut has invested heavily in the development of tooling and machinery to meet the growing demand in this sector. The company has also been involved in supplying fasteners for four major photovoltaic solar plants built in the last 12 months as part of South Africa’s renewable- energy programme.
Moreover, Engineering News reported in May that Trade and Industry Minister Dr Rob Davies had confirmed the establishment of a team of technical experts to develop a post-2020 Automotive Master Plan, which would provide guidance and support for the sector beyond the current Automotive Production and Development Plan (APDP).
Light, medium and heavy vehicles, as well as motorcycles, will be included in the new plan, which will create a framework to secure higher levels of investment and production, higher exports, deeper localisation and expanded employment.
The current APDP was a follow-on from the Motor Industry Development Programme and will continue until 2020. Incentives worth R7.8-billion that have been directed towards the sector as a result of the APDP have spawned R28.5-billion in investment by original-equipment manufacturers, while exports increased by R150-billion in 2015.