Colloquium on Beneficiation: Day 2

Meeting report

Colloquium on Beneficiation (Day 2)
Federated Unions of SA (FEDUSA) presentation
The Chairperson noted that there was no PowerPoint presentation by Fedusa, and that hard copies of the oral presentation would be forwarded on the following day.

Mr Denis George, General Secretary, Fedusa, indicated that he would be talking about radical transformation, which President Jacob Zuma had referred to in his State of Nation Address (SONA). He noted that the arrangement between Parliament and the National Economic Development and Labour Council (NEDLAC) was “softly regulated”, which he saw as a problem. The President, during the SONA, said he would request the Deputy President to address the process of radical transformation of the South African economy and such discussion would be heralded by the government instead of NEDLAC.

Mr George said that the FEDUSA welcomed any discussion and would like to engage in it to learn more about the defects of the current system. There was a challenge that exceptional leadership of that discussion would be needed. The call for radical transformation was not something new, having first been introduced in 1994 through the Reconstruction and Development Programme (RDP). The RDP explicitly stated that the radical transformation should be based on democratic process in order to take its course.

Fedusa took the view that many policies were inconsistent and incoherent and he would notify the leadership of FEDUSA, the Congress of South African Trade Unions (COSATU) and the South African Democratic Teachers Union (SADTU) about the discussion and request them to provide support to that initiative and contribute to the discussions. Currently, Fedusa was collaborating with The Manufacturing Circle on a number of declarations, which were not yet ready to be disclosed.

Mr George said that he had learnt, from his experience in working with international labour organisations, the OECD, World Bank and IMF, that it was preferable to have one labour committee, with committed and expert people, to do the analysis and assessment, determine what policy interventions were needed and draft the necessary documents to take the process forward. He had identified a few areas on which he believed stakeholders must focus, although he pointed out that it was a challenge because politicians were elected for short periods, and their involvement in the discussions could negatively impact on the need to urgently increase the GDP growth rate and addressing the issues of poverty and unemployment to move the economy forward. However, the processes in question at the moment were to be led by the President and Deputy President. He believed that some of the issues could be up for discussion at the forthcoming Nedlac summit.

He noted that the Fedusa supported industrial development action plan but believed it needed a reformation. The discussion should take place in terms of social accord between government, business, labour, and community constituencies. Support must be provided for local procurement. Discussion should be based on consensus and it should accommodate academics and other experts on the matters.

The Chairperson reiterated that the verbal presentation should reach the Committee in hard copy by the following day. It would be difficult for Members to engage with it, as they had no hard copies. The Committee was facing time constraints and it might be difficult to engage with presentations, so the Committee might need to schedule another day in the following week to engage with the presentations.

The Manufacturing Circle presentation
Mr Coenraad Bezuidenhout, Executive Director, The Manufacturing Circle, took the Committee through the presentation, focusing on the peculiarity of the term beneficiation, high-level interventions, beneficiation and manufacturing (the status quo), the current challenges to manufacturing, and the policy changes

Mr Bezuidenhout stated that numerous domestically-based manufacturing firms located both upstream and downstream of the mining value chain were not only supplied by mining, but also supplied the mining sector with mining, conveying and processing equipment.

Mr Bezuidenhout touched upon the particular meaning attached to the term “beneficiation”, and said that beneficiation and the role of the manufacturing sector in the beneficiation process was not only limited to the actual beneficiation of minerals, but extended also to beneficiation other raw materials such as wood and agricultural products, recyclable materials such as scrap, and human resources. Beneficiation involved value addition and processing, and many processes were more common to the activities of manufacturers rather than those of miners, and farmers or other upstream activities. Beneficiation of recyclable materials and scrap, for example, foundry activity, paper and packaging were often more job-intensive and less energy-intensive than beneficiation of ores.

Mr Bezuidenhout noted five high-level interventions needed to increase output. These were:
- to level the playing field with regard to intellectual property rights;
- social dialogue realities meant that the trend of business being treated by government as an “opponent” was likely to remain same and intensify
- there was a need to promote investment infrastructure and services that either directly beneficiates or indirectly promoted investment in beneficiation activities;
- there was a need to identify preferential procurement opportunities for locally beneficiated products; and
- the need to de-politicise and promote access to land and raw materials.

Mr Bezuidenhout moved on to the section entitled “Beneficiation as manufacturing (status quo)” and noted that since 2008 the manufacturing sector employment had been decreasing and that South Africa’s manufacturing conditions had deteriorated in relative terms. Stable conditions were expected over the medium term, but such optimism was perceived to decline over the next two years.

Mr Bezuidenhout stated that manufacturing was challenged by the labour market stability, elevated wages and input costs, competition from imported goods, low productivity of labour, lack of adequate skills and subdued consumer demands. To achieve labour market stability, there was a need to have auditable strike balloting and zero tolerance enforcement on intimidation and strike violence. Better demand conditions and reigned-in administered costs could solve the problem of elevated wages and input costs.

Mr Bezuidenhout believed that the policies related to imported goods should be revisited, to promote a level playing field and achieve better local procurement. To address the low productivity of labour, there should be a decentralised bargaining bottom-up pact around productivity targets. In order to deal with skills shortage, there should be better industry or government coordination, and better and more primary and secondary schools producing better students. Lastly, he suggested that there should be a campaign to motivate local consumers to buy local goods.  

The Chairperson thanked Mr Bezuidenhout, and reminded him that she herself had been serving as a public representative since 1994, and believed that she was well acquainted with the Constitution and good governance, having also covered the latter in several books that she had written. This was the first time since 1994 that she had seen statements in a presentation that bore no relation to what the Committee was addressing in this colloquium on beneficiation. She said that the suggestion that beneficiation was a term peculiar to South Africa was problematic, as it was used globally, and with the statement that Mr Patel was still the Minister of Trade and Industry. Furthermore, she thought that the references to high level interventions in paragraphs 2, 3 and 5 contained some unjustified statements. She asked that Mr Bezuidenhout apologise for these.

Mr Bezuidenhout apologised and said that he had re-worked his presentation but mistakenly came with the wrong PowerPoint version. He asked that Members disregard the inaccurate statements and said that he would replace the incorrect version.

Plastics SA presentation
Mr Anton Hanekom, Executive Director, Plastics South Africa, noted that his presentation would give some suggestions on beneficiation and how the Committee could assist the plastics industry grow in the future. He said plastics were part of daily life and Plastics SA played a role in the growth and development of the South African industry. It tried to address plastics related issues, influence role players and make plastics the material of choice. It represented all sectors of the South African plastics industry, including polymer producers and importers, converters, machine suppliers, fabricators and recyclers. He briefly set out the Plastics SA vision (see attached presentation for details).

He noted that an integrated approach to beneficiation would be useful. The plastic industry offered skills development and innovation, and this included job training to develop new skills and procedures, development of global testing benchmarks, improved efficiencies of equipment use, and reliable skilled operations to maintain standards. He estimated that in South Africa there were 1800 converters, most being small, medium, and micro enterprises (SMMEs). The amount of virgin material converted in 2013 was 1 400 000 tonnes and 280 000 recyclate. The plastics industry employed 60 000 people. Approximately 55% of all polymer went into packaging. The market size ex-converter was estimated to be around R50 billion.

Mr Hanekom said that the plastics industry contributed enormously o the South Africa GDP, at 1.6% and manufacturing at 14.2%. As a result, the plastics industry was defined by the government as a priority sector. Apparent consumption of virgin plastics materials stood at 2%. He provided a breakdown of how polymer was locally converted into plastics, targeting various market sectors including electronics and appliances (6%), building and construction (15%), flexible packaging (26%), rigid packaging (29%), and the remaining percentages were allocated to automotive and transport, engineering, agriculture, housewares, furniture, medical clothing, and footware and sports and leisure.

He concluded his presentation by suggesting an integrated approach to beneficiation which combined policies/regulations and programmes, trade, standards, labour, export, recycling, labs/testing facilities, research and development, logistics, skills, technology, input costs, investments, and incentives. He suggested that such integrated approach to beneficiation should be applied by the plastics industry sub-sectors.

Acacia Healthcare presentation
Mr Richard Allen, Marketing Manager, Acacia Healthcare, provided an overview of Acacia Healthcare and its vision (see attached presentation for full details). This company manufactured and distributed a wide range of medical, surgical equipment and related consumables. Its clients included private and state hospitals, private practitioners, wholesale and retail pharmacies. Its products were serviced by a national sales force and supported by a telesales infrastructure.

He noted that the in-house manufacturing processes included:
- extruding, injection moulding, blow moulding;  
- cutting, welding, printing, assembling and testing;
- packaging;
- ETO sterilising
- warehousing

Mr Allen said that medical surgical products were 65% Tupperware and 35% medical textiles. 40% was locally manufactured, 20% was locally packaged and 40% was imported.

Mr Allen gave the breakdown, as an example of the Oxysure O2 Mask cost. The total cost was standing at R5.62 million, excluding VAT, delivery and business costs. Plastics SA was awarded the Western Cape Department of Health (WCDOH) tender worth R5.75 million, including VAT.

He identified pressures facing the business. These included the fact that local growth was hampered by cheap imports, the high costs of running the business, the lack of volume sales to promote healthy competition, and price reductions and regulatory expenses. In the government sector, local growth was challenged by having un-defined local manufacturing preference system for the medical device industry. There were no supplier facility or financial background inspections, resulting in unsustainable tender bidding. Meeting the South African Bureau of Standards (SABS) standards was excessively expensive. There was non-compliance on tenders in many regions. In the private sector, the local growth was challenged by medical insurance companies’ requirements, per diem rates procedures, multi-national companies offering a product “basket”, and private healthcare groups sourcing their own products.

Mr Allen noted that there was discontinuation in some PVC/PP products, including nasal cannulae, Ryles duodenal tubes, feeding tubes, control suction catheters, bulb syringes, scrub brushes, nelaton catheters, urine drainage bags, leg bags, and bile bags.

Gold Sun Industries (GSI) presentation
Mr Arik Baruch, Managing Director, Gold Sun Industries, provided an overview of the GSI and said that it was a SMME which was a family owned-business that mainly used plastics in its production process from SASOL. It supplied the major retailers and independent companies in South Africa. 30% of its products were exported to neighbouring countries. The products included outdoor, patio and children’s furniture, toys, houseware, storage solutions, and contract products.

Mr Baruch took the Committee through the stages of manufacturing. At the outset, virgin raw materials supplied by Sasol, with locally produced addictives and colorants, were blended, and secondly the injection moulding of products was conducted.

Mr Baruch provided the production costs breakdown, focussing on key input costs. Raw materials costs amounted to 70% and labour costs 11%, with the rest consumed by electricity, packaging, transport and other expenses.

Mr Baruch noted that the GSI contributed to downstream beneficiation, through cutting of various profiles of steel to become chair legs, machining profile legs to final form, assembling and fitting of various mainly plastic but also non-plastic components, to form the finished products. It also attended to warehousing and distributing finished products. It made use of electrical and mechanical contractors. He drew the Committee’s attention to capital investment and labour requirements, which included machinery and auxiliary equipment, moulds, factory building and the warehouses, and the employment of skilled plastic technologists and engineers, toolmakers, and semi-skilled labour.

He noted that there were critical factors for local beneficiation. These included local supply and cost price of raw materials, energy costs and security of supply, availability of semi-skilled and skilled labour, export promotion incentives, Department of Trade and Industry incentives for capital investment, import replacements policies, competitive tool-making facilities in South Africa, design of products from conception to production, and tariff protection on finished products.

He concluded by drawing the Committee’s attention to what he regarded as two critical factors for global competitiveness, namely, the high cost of local and regional product distribution, due to lack of infrastructure, and the fact that most of the local factors alluded above also applied globally.

Discussion
Adv AD Alberts (FF+) presided over the discussion session.

Mr D Macpherson (DA) asked The Manufacturing Circle to give clarity on quarterly manufacturing employment, specifically the shedding of  jobs in the second quarter of 2014. Based on the Manufacturing Circle’s survey, He found the figures of employees who lost their jobs, as set out in the survey by the Manufacturing Circle, to be “frightening”, and asked what the totality of the figure could be. He asked if the debates taking place around beneficiation raised any concerns to the Manufacturing Circle responses.

Ms M Tsopo (ANC) directed her question to all presenters, and asked how they would suggest resolving the issue of employment without involving the government. She asked what relationship these companies had with the universities, and whether they were succeeding in recruiting and retaining some of the skills which were needed in their various fields, and how many jobs they were creating. She said that the Committee was not looking at beneficiation alone, but also wanted to consider the number of jobs created. She asked what factors were driving the transport costs so high.

Mr B Mkongi (ANC) found that the common issue raised by all presenters was related to imports, which made the companies in South Africa uncompetitive. Two of the presenters had alluded to the fact that South Africans were reluctant to buy local products because imported products were cheaper, and asked for confirmation that this was what they were saying. He appreciated the efforts being made for beneficiation. He asked what strategies were in place, if they were willing to try to increase beneficiation, and what legislative barriers were faced.  

Mr Mkongi asked the Manufacturing Circle to give more detail on the ownership processes, and asked whether there was anything in place, or that could strengthen, the industries’ activities.

Ms Fubbs sought clarification how many members there were in the Manufacturing Circle. She asked if it had done studies on pricing, on the one hand, and costs of imports and  capacity of the market to absorb products, on the other, and what measures had already been taken, or could be taken by the Committee, to increase the creation of jobs.  

Ms Fubbs sought clarity from Plastics SA on its approach to beneficiation. She said that it would be helpful to clarify the fluctuation in relation to the apparent consumption of virgin plastics materials, which had been poor in 2011, quite good in 2012, but had declined significantly in 2013.

Ms Fubbs remarked that health costs to consumers were very high, but it was said that many industries in this sector had closed. She asked what could be done to resuscitate them, and why they had closed if they were needed.

Mr Bezuidenhout responded that the Manufacturing Cycle had created jobs and lost some jobs in the first quarter and second quarter of 2014, and the main difficulty was meeting demand. In order to remain competitive and ensure that supplies were consistent, some companies were necessarily reverting to automisation of certain activities, or were importing some required aspects instead of locally manufacturing. The issue of pricing ought to be addressed across all sectors.  Responding to Ms Tsopo, he said that industry development organisations and employers organisations had a number of ways of looking at skills development and had programmes stretching all the way from pre-primary students, to supporting post-doctoral engineering students. They focussed on areas where there were skills shortages, but skills shortage was a problem all over the world. South Africa needed to ensure that primary and secondary schools delivered good students who were trainable, marketable and productive. He believed that in relation to the imports, the laws needed to be tighter and stronger, but also noted that effective enforcement of those laws must happen. He noted that market surveys were conducted from time to time. There was a need to look at sensible differentiation that would attract the consumers. In relation to job creation, he stated that scrap and energy were areas in which more jobs were created.

Mr Anton noted that Plastics SA took on about 3000 learners per annum, some of those in areas where there were skills shortages. It was actively involved with universities, where it funded certain skills. The University of Technology in Tshwane had established a new curriculum in material sciences, focussing on skills around raw materials. Plastics SA had enough administrative managers, but it lacked managers with technical skills. It had also created a course in machine settings, and it was itself training artisans. There was also an articulation programme, which looked at what was happening between the various companies.

Mr Anton agreed that price fluctuations were impacting on the industries, as such unanticipated fluctuations made it difficult for the companies to accurately gauge what their products would cost. He suggested, in regard to imports, that any legislation should seek to reach a balance between imported and home-grown products, and create a space for the local products to get to the market. He acknowledged that finished products from China were a problem, as they were sold at the price of raw materials. 

Mr Baruch said that SASOL was in control of the costs for his company, and worked on similar policies of control pricing. With reference to creation of jobs, he said that GSI lacked semi-skilled and skilled labour. However, it had a workforce comprising of people who did finish at primary or secondary schools, and who were then given training, for example, to allow them to operate machines and learn about the raw materials. However, it was sometimes difficult for the company to train people without resources. However, there was a definite need to train some artisans for the sake of allowing the business to grow. The GSI was not losing, but creating jobs. It was engaging with the universities and had access to different people in various industries to try to better educate, and create more skilled people in that industry.

Mr Baruch confirmed that there were cheap imported goods from Hong Kong, China and Malaysia, and that because of this influx of cheap imported goods, consumers were no longer supporting local products. He would thus support the idea of putting limitations on imported products.

Mr Hanekom said that Plastics SA was challenged by having certain products designated by the government, and said that perhaps the identification needed to take place at a higher level – for instance by specifying the country such as Brazil. Plastics SA did not manage to get into cross cutting economic links, which did not help it. Another problem was that tenders could take two years to be finalised.

Adv Alberts indicated that any further questions should be reduced in writing, handed to the presenters concerned, and that they should respond by the following Monday.

The Chairperson took over the Chair.

National Employers Association of South Africa presentation
Mr Gerhard Papenhus, Chief Executive Officer, National Employers Association of South Africa, briefly outlined the situation in the metal and engineering industry (MEI), which he stated was in decline. He provided an overview of the types of products manufactured, noting that the vast array in this sector included producers of iron and steel, manufacturing engineering, general engineering, building and repairs of ships and boats, construction engineering, electrical engineering, the lift engineering industry, and the plastics industry.

He noted that the diverse nature of the MEI, coupled with the centralised, ‘one-size-fits-all’ nature of the functioning of the Board, contributed to the dilemna that South Africa faced in manufacturing. He said that unless the Metal and Engineering Industry Bargaining Council (MEIBC) was unpacked and transformed, no other attempts to address the challenges would succeed.

He said that it was impossible to give an overview of the manufacturing stages in this industry, because of its diverse nature and wide range of products and processors, ranging from primary steel producers to converters. However, the key input costs were energy, labour, material and transport costs.

Steel and Engineering Industries Federation of South Africa (SEIFAS) presentation
Mr Kaizer Nyatsumba, Chief Executive Officer, and Mr Henk Langenhoven, Chief Economist: Steel and Engineering Industries Federation of South Africa (SEIFAS), attended the meeting. Mr Nyatsumba noted that the SEIFAS represented 27 independent employer associations in the metal and engineering industries, with a combined membership of over 2 000 companies employing over 210 000 employees. SEIFAS’s core business was to represent and promote the interests of the metal and engineering industries, through lobbying and capacity building, provision of related services and building of good relations with key shareholders. Its services included skills development and human capital, attending to issues of health, safety, quality and environment, economic and commercial concerns, legal matters, industrial relations, marketing and communications, assisting with administration and accounting for associations, and the SEIFSA Training Centre. The latter was situated in Gauteng, and was accredited by the Sector Education Training Authority. It provided quality, competency-based training in apprenticeships, learnerships at NQF levels 2 to 4, instrumentation courses, basic safety courses, multi-skilling of artisans, trade testing and assessments.

Mr Nyatsumba defined beneficiation as ‘the ability to move up the value chain and complex endeavour that requires a coordinated policy approach’. He said that the South African market was too small to support the scale of production needed in the sector. The metals and engineering sector was highly exposed to the international market, because 60% of its products were exported and imports also constituted 60% of the products in South Africa. The total cost of imports exceeded R97.662 billion.

Mr Langenhoven indicated that the metal and engineering industry was complex and traded itself so it was virtually impossible to follow a commodity through its stages of production to a final product, and that it was a massive challenge to set up a policy to achieve this end. The sector was dependent on long and expensive logistics routes, as well as being heavily dependent on energy and on local government services.

In respect of the sector dynamic approach, Mr Langenhoven noted that domestic supply stood at R181 billion, domestic sales at R147 billion, and exports at R159 billion. Inputs stood at R232 billion, and outputs at R306 billion. He gave a graphic illustration of the concept of sector intervention (see attached document).

Mr Langenhoven identified seven points where he said that intervention was needed, namely:
- ensuring secure domestic supply of input products. The interventions should include incentivising production, preventing tax exports, and supplying below export prices.
- ensuring secure import supply of input products. Interventions here could include tariffs, quotas, exchange rate level, and import parity pricing subsidies.
- building of capacity. The relevant interventions included incentivising investment, incentivising human capital development, and inviting competition;
- enhancing exports, where the interventions should be aimed at enhancing competitiveness;
- enhancing domestic procurement, where again, interventions should be enhancing competitiveness;
- protection against imports and designation. The relevant interventions should be tariffs and quotas.
- infrastructure. Interventions in this area should include intellectual capacity building through education and training, physical infrastructure (road, rail and electricity), and research incentives.

Mr Langenhoven elaborated on what he termed the “silent features” of sector dynamics (see attachment). He said that capacity utilisation in metal and engineering had declined between 2002 and 2011 and, since then, had been gradually increasing. He also noted that there was cost escalation in manufacturing. For administered prices, inputs and outputs was estimated at 12% of weighting. Gross fixed investment was suffering.

Mr Langenhoven concluded by stressing that manufacturing was critically important, if South Africa hoped to grow its economy at a higher rate than it had done over the past few years. It would be vital for the government to play its part to stimulate or incentivise manufacturing and to be competitive internationally, and the policy measures should facilitate the exploitation of opportunities in international supply chains and manufacturing.

The Chairperson thanked the presenters, and noted that the Committee had addressed the latter issues in depth in the last year.

ZIMCO Group presentation
Mr Bob Stone, Sales Director: ZIMCO Aluminium, introduced the presentation by providing an overview of ZIMCO divisions and products.  He noted that the Zimco Group was South Africa’s leading producer of industrial and base minerals, and a major producer and supplier of lead, zinc and aluminium metals, alloys and related chemicals and engineering plastics. Zimco Group was a wholly owned subsidiary of Eco-Bat Technologies Ltd, a United Kingdom based company.

He named the divisions that manufactured and distributed a range of intermediate industrial products (see attached presentation) and elaborated on the products that were beneficiated through scrap metal, being lead, zinc and aluminium. More information could be obtained from the Zimco Group website and the various company websites.

He explained the basic stages in the manufacture of the metal products in lead, zinc and aluminium, noting that these were:
- scrap metal collection and purchase
- manual and mechanical sorting of the scrap metal
- melting/smelting and alloying/casting into ingot, sows or pellets/and die-casting, atomising, milling, rolling, or extruding.
- fabricating and assembly
- packaging and stockholding
- distribution and sale

Non-metallic products would undergo processes of either mining, sorting, blending and mixing and pelletising. Plastic products would involve alternatives such as heating, extrusion, die cast, assembling, painting, final finishing processes and assembly.

He noted that scrap metal was a sometime forgotten but extremely important and critical South African resource, without which the South African market could not function.

Mr Stone provided the key breakdown of key input costs, noting that raw material – scrap aluminium was at 62.0%, electricity at 3.4%, SASOL gas (the main melting medium) accounted for 5.5%, repair and maintenance, PPE, Packaging, water, transport were at 21.7%. The internal transport of fork lifts, health and safety, and external transport costs accounted for 3.2%

Mr Stone finally explained the factors to ensure local beneficiation and illuminated additional critical factors to ensure global competitiveness (see attachment).

ArcelorMittal presentation
Mr Paul O’Flaherty, Chief Executive Officer, ArcelorMittal South Africa, gave an overview of ArcelorMittal South Africa, the basic stages of production, and outlined the value of creation model, the production flow in relation to flat steel, long steel, coke and chemical, and total shipments. He set out the main steel cost drivers, input cost positioning, downstream development, and beneficiation (see attached presentation for full details).

Mr O’Flaherty said that the ArcelorMittal had a remarkable footprint. It was an economic growth engine, being an employer, job creator and skills developer. It could be seen as a catalyst for change in South Africa. It positively impacted on local communities (see attachment).

Mr O’Flaherty provided the key breakdown of key value input costs and outputs. The value inputs included input materials consumed, energy, water intake, human resources and investment. The value outputs included financial outputs, product outputs, safety and socio-economic outputs.

Speaking to the topic of downstream development, he noted that AlcelorMittal had contributed R1.5 million over five years to support and develop the downstream manufacturing industry initiatives. Its support had revitalised local manufacturing concerns, including companies dealing in nails and staples, the barbed wire industry, the galvanised wire industry and renewable energy.

In regard to beneficiation, Mr O’Flaherty focussed on 2013 major customers, critical factors of beneficiation, designation and location. He noted that steel manufacturing supported the National Development Plan (NDP) and the government industry policy on beneficiation. He noted that the critical factors affecting beneficiation were costs, specifically the labour costs seen against productivity, high electricity costs, high transport costs, high port costs and inflated electricity costs that were levied to finance inefficiencies of local municipalities. Other critical factors included the lack of any trade protection for primary steel products (limited support for finished products), limited cooperation between big business, government and labour. He noted that there was unreliable electricity supply and major skills shortages, and that the costs of doing business in South Africa were high because of security, the need to instil control against crime, and safety concerns. There was no cooperation of collective industry forums to promote steel consumption and investment, for fear of falling foul of the Competition Commission. There were not sufficient proper incentives to support local beneficiation of raw materials, limited value add for export incentives and high costs of capital (because the industry did not keep up with latest international technology).  

He repeated that steel manufacturing supported the NDP and government industry policy on beneficiation in the context of contributing to the GDP growth, creation of new jobs and skills development. ArcelorMittal and other local steel companies could help meet added demand. An additional 8.3 mtpa was required by 2030 to support the National Development Plan, and this could be supplied locally by ArcelorMittal.

Discussion
Mr Mkongi took the chair for the discussions.

Ms Fubbs sought clarity on the constraints the steel industries were facing and wanted more detail on the question of pricing. Manufacturers were complaining about unaffordable prices, but opted to import. She said that the issue of insufficient skills was being repeatedly raised, but said that this was not so important in fact as the issue of transformation, and that implied the need to debate and answer the question of why there were not more black manufacturers or members of associations, what impediments they faced, and whether this was related to lower skills levels, or the fact that many of the current businesses were family-owned.

Adv Alberts noted that he would have to leave after asking his questions. He sensed that the presenters were generally proposing two labour relations regime streams: one for big companies and one for the small companies. That issue also was linked to the question the Chairperson asked in relation with social transformation. The Labour Relations Act was structured to protect both employers and employees, but if there were specific problems identified, then the Committee would have to see how these could be addressed in the future.

Ms Tsopo also sought more elaboration on the large and small debates alluded to in the presentations, and on the fiscal issue, which one presentation said was under-estimated. The Committee was aware that the companies were facing the challenges of fiscal infrastructure. Industrial policy was not limited to the Department of Trade and Industry but other departments were also involved. She asked ArcelorMittal to “come clean” on the suggestions around awarding of irregular contracts, so that the Committee could fully grasp what was happening, and find a solution.

Mr Mkongi said that one cross-cutting question cutting across board was how beneficiation could be used to promote transformation.

Mr Papenhus noted, in relation to the Labour Relations Act, that collective bargaining was problematic. He noted, when looking at the effects of strikes, that one company may employ 1000 employees and another employ only one employee but both could be affected at the same scale if their demands were, collectively, responded to with a strike. There was a numerical problem, and he suggested that in order to achieve protection of small and big business, the collective bargaining clauses should be reformed.

Mr Papenhus said that the lack of black people in some sectors was simply reflective of the fact that they had little interest in the sectors.

Mr Nyatsumba answered the questions on transformation by agreeing that radical transformation was not easy, and confirmed that many of the well-established companies were indeed family-owned businesses. He suggested that, for effective transformation to happen, these existing companies should enter into partnerships with black owned companies, to facilitate the black players getting into the industry also.

Mr Langenhoven said that business in his sector was affected by high transportation and electricity costs. Electricity prices were very volatile and uncertainties here had affected small business. He suggested that the local government should be consistent in pricing electricity. If there were more reasonable transportation and electricity costs, companies could perform better.

Mr O’Flaherty reiterated that imported products were negatively impacting on pricing. This was a topic that needed further debate. Other challenges that he highlighted affected pricing, including labour, electricity, and transportation. He said that Durban was considered to be particularly affected by Chinese imports, and there was a need to see how local products could benefit from subsidisation.

Mr Mkongi asked that the presenters detail their answers in writing.

Ms Tsopo provided the concluding remarks. She thanked all presenters for honouring the invitation and briefing the Committee. She reminded everyone that the President had, in the latest State of the Nation Address, stressed the need for  radical transformation and therefore all companies had to take beneficiation more seriously.

The meeting was adjourned.