6 December 2012

South Africa: Statement On Inter-Departmental Task Team (IDTT) On Irone Ore and Steel

press release

Cabinet has agreed to a set of recommendations put forward by the Inter Departmental Task Team (IDTT) on Iron Ore and Steel which was established to design a set of inter-related policy instruments and give effect to government efforts to secure a developmental iron ore and steel price in support of downstream, value-adding industries of the manufacturing sector.

It is of significant national importance that SA leverages a competitive advantage from its resource endowment by ensuring that strategic minerals are made available at developmental prices to value-adding sectors. Steel is the single biggest intermediate input into downstream manufacturing and should represent for SA a competitive advantage and not, as is the case at present, a disadvantage. A developmental steel price is also a significant lever to attract foreign direct investment into strategic manufacturing sectors of the economy.

High international prices have driven a massive unimpeded expansion of domestic scrap metal exports, driving up prices to domestic mini-mills which are under threat. These exports are associated with cable and metal theft with attendant damaging social and economic consequences. There is no evidence that measures to control the export of scrap metal will undermine scrap collection livelihoods. Many countries impose limits and in some instances, a total ban on the export of scrap metal.

Against the background of these and other factors the Cabinet has agreed to a range of instruments designed to secure developmental iron ore and steel prices. These include:

Legislative amendments to the Mineral Resources and Petroleum Development Act (MPRDA) which will be released for public comment shortly by the Department of Mineral Resources.

The amendment of the Competition Act to take into account and ensure that iron ore price concessions accruing to the primary steel industry are indeed passed on to downstream steel users. This will require appropriate powers to determine pricing methodologies, monitor compliance and sanction non-compliance. The amendments will be finalised in 2013. This work is led by the Department of Economic Development.

Strategic utilisation of state infrastructure to support the developmental outcomes set out above. This work is led by the Department of Public Enterprises.

Proposals under the terms of the International Trade Administration Act to considerably strengthen the existing conditions and export control measures for scrap metal. This work is led by the Department of Economic Development under whom the International Trade Administration Commission (ITAC) falls. These measures will serve to prevent the export of stolen metal through strengthened inspections and processes under the Second Hand Goods Act and help to safeguard the supply of affordable scrap metal to domestic mini-mills.

A process to establish new domestic steel production capacity and hence to contribute to effecting a reduction in the steel price and achieve related economic objectives. This process, which is at a relatively advanced stage, is led by the Industrial Development Corporation (IDC) and includes the participation of potential international investors. Strong conditionalities in the proposed agreement will seek to ensure that the shortcomings of the ISCOR unbundling process are avoided and that developmental objectives are achieved. Since this process is the subject of ongoing and confidential negotiation no further information will be made available at this stage.

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