GENUINE GREEN GROWTH REQUIRES A JUST TRANSITION AND NATIONALISED STEEL INDUSTRY
The South African Federation of Trade Unions (SAFTU) is worried by the announcement made by ArcelorMittal to shut foundries in Newcastle and Vereeniging, which will result in the retrenchment of over 3 500 workers, a vast share of its workforce, without having a Just Transition plan in place for the affected people and communities. Losing such a large number of jobs at a time of extreme unemployment and cost of living crises, will sentence these workers, their households and the surrounding economy to poverty, misery, crime and alienation.
ArcelorMittal is blaming high logistical and transportation costs, inadequate demand, the ban on export of scrap metal and load shedding for their poor performance. The chaos at Eskom and Transnet have indeed affected many producers, and understandably, employers have complained about additional operating costs and potential losses. While Eskom prepares to decarbonise by shutting down coal-fired power plants, utter chaos and extreme load-shedding have followed the parastatal’s corporatisation (losing its public-interest mandate and fragmenting its functions), privatisation of generation (to Independent Power Producers), and debilitating corruption that has gone largely unpunished.
Added to Transnet’s incapacity, also facing corporatisation, privatisation and corruption, plus liberalised imports from cheaper producers abroad, our industrial economy has felt the extreme stresses of neoliberalism and corporate-driven globalisation.
However, the Luxembourg-based ArcelorMittal’s tendency to blame the scrap metal ban as a factor behind their proposed cuts is hypocritical and exposes the contradictions of capital. In their public statements, ArcelorMittal wants the ban to be lifted. It argues that the “introduction of a preferential pricing system for scrap, a 20% export duty, and more recently, a ban on scrap exports has allowed steel production through the electric arc furnaces route at an ‘artificial’ competitive advantage when compared with steel manufacturers beneficiating iron ore to produce steel.”
The irony is that as a society and workforce, and for the sake of the environment, we do need to recycle scrap, and to allocate our electricity much more responsibly. Therefore, to melt existing scrap steel for reuse makes much more sense than exporting it. The ban on scrap metal exports is also sensible so as to disincentivise the theft and sabotage of our own public infrastructure, because if the demand for the stolen scrap metal is reduced by stopping scrap metal export, there’s a much better chance that the state can halt metal thievery and trace the syndicates who are wrecking public assets for private profit.
Another reason to use recycled scrap metal in the furnaces is that South Africa faces climate sanctions in coming years, because our industrial economy is still so dependent upon high-electricity consumption by smelters. The European Union’s Carbon Border Adjustment Mechanism will, in any case, raise tariffs on imported steel from these same foundries, because the South African carbon tax is below US$0.40/tonne, compared to the current EU Emissions Trading Scheme price of $80/tonne of CO2. Unless our Treasury increases the South African tax by a factor of 200 and keeps raising it, our exports of steel, iron, aluminium, petrochemicals, cars and other products with embedded CO2 will be subject to the EU climate sanctions. (These will be applied starting in 2026). Whether or not we accept such a process (given Europe’s long history of colonialism and economic imperialism), it is underway and is likely to be adopted in other Western jurisdictions.
And that carbon tax does remind us of ArcelorMittal’s irresponsibility: exporting profits and running local foundries into ground – Newcastle is just the latest – without shifting energy inputs to renewables. ArcelorMittal’s executive chairman Lakshmi Mittal has long been accused of milking local operations, as local steel capacity has collapsed from a high in 2008 of 900 000 tonnes/month to a low in October of only 350 000 tonnes, output that was 16% less than in September, and 17% less than October 2022.
The conditions in South Africa are especially distressing because ArcelorMittal’s failures long predate the ban of scrap exports. During the 2010s, ArcelorMittal SA regularly posted losses until 2019, when it finally reported a profit. The company spent the 2010s destroying excess capacity, by closing foundries and retrenching thousands of workers. Between 2014 and 2020, ArcelorMittal reduced its workforce by more than a half, from 15 000 to 7000. The contemplated retrenchments of 3 500 that will follow the closure of these two plants, will add to this bloodbath.
This is part of the cost-cutting measures that have been implemented to return the company to profitability. Remember, this is the norm. Under capitalism, companies operate mainly to make profits, and any loss-making is solved through restructuring (company reducing input costs, mainly labour costs, to return to profitability).
The Just Transition process in this country is presenting new opportunities for the steel manufacturing. It requires greener production by using renewable energy for steel manufacture, and in turn the smelted steel and aluminium will be required for locally-produced wind turbines, solar panel frames and a much more appropriate transmission grid that can draw renewable energy from the entire countryside. Because Lakshmi Mittal has no interest in this sort of energy transition, he is simply shutting down plants which could be major contributors to our post-carbon economy.
The capitalist mantra of restructuring and building efficiency has failed, dealing a great blow to the oft-repeated fallacy that the private sector is more efficient that the public sector. ArcelorMittal is a former government company – Iscor, which began operations in 1928 – that underwent privatisation in 1989. At that point, it was argued that new buyers (then consisting mainly of its local managers) would improve its efficiency and fortunes – although this firesale represented Afrikaner ruling-class looting of a state it was soon to abandon as democracy became inevitable. Today, ArcelorMittal’s persistent problems are created by the contradictions inherent in capitalist overproduction. This shows that privatising Iscor was not a route to greater fortunes, but just a way to give the private sector – first local, then foreign imperial cartel – more space for profiteering.
Under capitalism, the success of an enterprise is determined by two things: being a monopoly and taking the advantages of imperfect competition or beating its competitors in a perfect competition. It is not a matter of whether you are controlled by government or the private sector. Having failed to beat its competitors domestically and internationally, ArcelorMittal is scrambling to blame government policy.
SAFTU has for years been campaigning that the production of steel for a developing economy was of such an importance that Iscor should not have been sold in the first place. Giving foreign capital more space in the economy, which at the beginning used its international tentacles to squeeze small domestic steel manufacturers, was never an option. To this end, we have called for the re-nationalisation of ArcelorMittal SA and included this in our Section 77 demands. We feel vindicated. The neoliberals who argue that state should play no role in the economy must note that the steel industry was not hamstrung by public ownership, but by the internal contradictions of capitalism, including ruinous competition.
In 2022, South Africa produced just 4.4 million tonnes of steel, ranking our economy 34th largest, while the top 15 – led by China – had at least 20 million tonnes of output. China and India have notoriously lax environmental regulations, so unless South Africa adopts similar protections against climate sanctions and uses nationalised steel for rebuilding our productive base in a sustainable manner, we can expect the world’s overproduction and excess capacity of steel – running between 20 and 30% of output – to swamp the rest of our beleaguered industry in coming months and years.
SAFTU has long been calling for a dramatic increase of state investment into the manufacturing sector, to create real, stable jobs to push back against the tide of unemployment, poverty, and inequality that besets the country. With South Africa’s stock market still exhibiting one of the world’s highest share capitalisations in relationship to GDP (the ‘Buffett Indicator’), with huge state-controlled funds available, and with so much corporate cash lying idle, no one can argue that such investments are prevented by lack of funding. The pre-neoliberal state strategy was to use such funding for parastatal investments via ‘prescribed assets,’ and that in turn was one way South Africa became such a major industrial power.
Today, in contrast, the retrenchment of ArcelorMittal workers indicates that the economy remains mired in a state of deindustrialisation. The loss of these decent jobs in the manufacturing sector will not be replaced by corresponding jobs in other parts of the economy. It will be replaced by non-standard work in the service sector, which pays nothing short of indecent wages that cannot sustain workers.
Deindustrialisation is now at such profound levels that state action is vitally needed. The share of manufacturing to the GDP has radically declined: from 24% of GDP in 1990, to 12% today. All the while, government has essentially been following the neoliberal austerity framework for the economy instead of focusing on real needs and job creation not-for-profit maximisation. The current “South African Steel and Metal Fabrication Master Plan 1.0” – supposedly ensuring carbon neutrality by 2050 – being promoted by Minister Ebrahim Patel is one indication of how neoliberal and pro-corporate the state remains: it fails to even mention nationalisation as an option, or how to apply Just Transition principles to steel.
SAFTU demands that government re-nationalise steel and increase spending on an extensive infrastructure rollout, so as to create a market for state-owned, worker-controlled steel industry revitalisation, not for capitalists. To do so, all steel producers – especially ArcelorMittal – should be assessed for massive liabilities in terms of worker safety and health, as well as environmental damage (extreme local pollution and greenhouse gas emissions, plus depletion of non-renewable iron ore stocks), with the price paid investors so as to nationalise the industry adjusted accordingly.
A genuine Just Transition is overdue, including the need to provide compensation to workers and communities. But we still will urgently need a strong steel industry, one powered with renewable energy and producing output that will rebuild our economy in a sustainable manner. To simply let ArcelorMittal close yet more foundries is another reflection of an utterly irresponsible corporate and state elite, which cares nothing for the future of this economy.
