Elitist BEE deals in the steel industry will not create jobs
The Congress of South African Trade Unions has been closely following developments in the steel industry, involving ArcelorMittal South Africa (AMSA) and Kumba Iron Ore (KIO). Steel is one of the key strategic industries upon which the country's growth and development hinge. It is not only important for industrial development but in the provision of services like housing, hospitals and schools. It sustains thousands of jobs both directly and indirectly in down-stream industries and services.
If the country is to achieve its objectives, key among them the creation of decent work, iron and steel must be sold at the lowest possible prices. But the ongoing battles between KIO and AMSA are certainly not helping to create the right environment to achieve this objective and are potentially highly damaging.
The ongoing saga has to be located within the context of the economic policies the country adopted pre- and post-1994. In 1989 the apartheid government decided to privatise Iscor, as the struggle for liberation of the majority of our people was at its highest level and beginning to bear results.
The new democratic government unfortunately consolidated this development by opening up the economy to the chilly winds of global competition by dismantling tariffs and capital controls. The liberalisation of the economy resulted in previously South African companies becoming multinational corporations.
Largely due to such competition from developed countries, Iscor found it difficult to remain profitable and that was used as an excuse to unbundle it into separate steel and mining companies. The mining component was listed as Kumba Resources (later changed to Kumba Iron Ore) and bought by Anglo American. The steel component was ultimately taken over by the global steel maker ArcelorMittal.
Thousands of workers were thrown on to the streets and many families went hungry as a result of that restructuring and turning what had been South African companies into footloose global companies.
Now KIO has decided to stop supplying iron ore to AMSA at lower prices which it was doing in terms of a 2001 agreement. However the huge amounts of iron ore, around 6.25 million tonnes per annum, which AMSA needs, can only be supplied by KIO given its capacity. The Department of Trade and Industry (dti) is now cap-in-hand, appealing to the two companies to act in public interest, but the appeal is falling on the deaf ears as the two conglomerates are chasing profits.
We share the dti's concern that these developments should not lead to more iron ore being exported without being beneficiated in South Africa and thus undermining efforts to industrialise the country.
While AMSA has been getting cut-price iron ore from KIO, it has been involved in nasty practices that do not have the interest of the country at heart. It has been involved in anti-competitive behaviour and been found guilty of price fixing and market allocation. As if this has not been enough it continues to charge import parity pricing and raking in billions of rands in profits.
In the midst of this saga AMSA has decided to get new BEE partners with strong links to some in government in the form of Ayigobi Consortium, which now has a 21% stake in AMSA. The deal is reported to worth 9.1 billion rands. AMSA went on to also acquire Imperial Crown Trading (ICT) which was given the right to search for any minerals (prospecting rights) for the 21.4% of KIO's Sishen mine by the Department of Mineral Resources (DMR) in March 2010.
The 21.4% prospecting right granted to ICT is the same AMSA allowed to lapse. Again, the shareholders of ICT have links with some in government. This is how business has been operating in the past decade, promoting narrow elitist BEE. As NUMSA says, this deal "clearly appears to be a get-rich-quick scheme involving a so-called BEE consortium, Imperial Crown Trading".
This deal is not addressing the key challenges the workers and the poor are facing. It is not about the creation of decent work, which is the key government priority. It will be increasingly difficult to dispel the perception that through this deal AMSA is buying political clout. This deal will entrench AMSA dominance in the steel industry to the detriment of the economy and job creation.
The current BEE policy is based on the view that empowerment means giving millions of rands worth of shares to a few individuals, while they leave the overwhelming black majority as disempowered as ever. Instead of making a rich elite minority even richer, BEE should benefit the workers, including the unemployed and poor communities.
BEE promotes self-accumulation and this cannot be allowed to continue in its current form. There is nothing broad-based about BEE deals like this one. The current policy on BEE should be replaced with a new law which will promote cooperatives which create jobs, develop skills and share the profits among workers and/or communities, rather that promoting individual accumulation.
COSATU supports NUMSA's call on the ANC, and the ANC government, "to mandate the cabinet to intervene to reverse these seriously embarrassing deals. If they are allowed to stand, they can do the country no good. The image of BEE, intended as a critical progressive measure to deracialise the South African economy, could otherwise be permanently tarnished".
COSATU wants to issue a strong warning that the ongoing saga must not be used as an excuse to retrench workers by either company. It must not lead to even a single job being lost. The economy has lost more than a million jobs already as many companies used the global economic crisis to justify retrenchments even in cases where it was not necessary.
The sad reality is that the whole saga involving AMSA and KIO is continuing despite the state owning about 18% of shares in AMSA through the Industrial Development Corporation's (IDC) 8.8% and the Public Investment Corporation's (PIC) 8.95%. The state also owns 5% shares in KIO through the PIC.
These developments point to the serious flaws of some of the economic policies the country has been pursuing pre and post 1994. Had Iscor not been privatised and ultimately sold to ArcelorMittal and its mining arm handed over to Anglo American, the economy would not be facing these challenges. These developments make the debate on nationalisation even much more relevant.
Even before the present deal, in May 2010, COSATU's Central Executive Committee reiterated the federation's demand that ArcelorMittal be nationalised, as steel is a strategic industry that must belong to the people as whole as envisaged by the Freedom Charter, which unapologetically states that: ‘the people shall share in the country's wealth'.
Statement issued by Patrick Craven, COSATU national spokesperson, August 18 2010
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