DA welcomes R1.5 billion fine for ArcelorMittal as a win for jobs
22 August 2016
The DA welcomes the settlement agreement entered into by ArcelorMittal South Africa (AMSA) following a Competition Commission investigation into steel price-fixing.
This is progressive step in allowing for small business to compete in the sector and create jobs, where previously collusion and a cartel had compelled small steel business to shut doors and retrench workers.
AMSA admits to having been involved in the long steel and scrap metal cartel, fixing prices on steel and has agreed to pay an administrative penalty of R1.5 billion. AMSA has undertaken that for a period of five years it will limit its EBIT (earnings before interest and tax) margin to a cap of 10% for flat steel products sold in South Africa. In addition, AMSA has committed to R4.6 billion capital expenditure over the next five years.
This highlights the uncompetitive behaviour that has long plagued the steel industry, led chiefly by AMSA and lends credence to the fact that it has been artificially protected. It also brings clarity to the situation which has been full of smoke and mirrors, with AMSA covering its tracks.
This admission by AMSA has also left the Department of Trade and Industry, and in particular, Minister Rob Davies with egg on its face, as both have continually defended and protected AMSA from criticism, especially around tariffs. AMSA have benefitted from imports via tariffs but have repeatedly failed to pass on the benefits to downstream manufacturers. This despite an ITAC agreement expressly prohibiting AMSA from increasing their prices in exchange for tariff protection, all the while Minister Davies stood by and did nothing to stop this unchecked violation.
At long last, AMSA’s pricing model has finally been shown to be highly uncompetitive and this is a small victory for local, downstream steel manufacturers. It is disconcerting to note that despite this protection and cartel, AMSA have failed to make a profit in half a decade which begs the question, where is all the money going?
The DA will continue to fight for competition and fairness for all industries in South Africa, with the need for economic development and job creation as dire as ever. We therefore look forward to tomorrow’s Portfolio Committee meeting where Minister Davies, the DTI and every other individual who has stood as a human shield for AMSA, to finally account for their actions in public.
Issued by Dean Macpherson, DA Shadow Deputy Minister of Trade and Industry, 22 August 2016
