“Job losses on this scale would have a domino effect, destabilising livelihoods and impacting related industries,” Seele said. Picture: Supplied
The automotive industry is reeling from uncertainty as ArcelorMittal South Africa (Amsa) announces a temporary reprieve on the closure of its Longs steel division, a move that could still have dire consequences for vehicle manufacturers.
Initially set to roll out at the end of this month, the shutdown will now be postponed for one additional month as discussions continue regarding potential government support, including a significant R380 million shareholder loan from the Industrial Development Corporation.
Ryan Seele, an executive member of the National Automobile Dealers’ Association (NADA), on Friday voiced significant concerns about the impact of Amsa’s operational losses, which have reached a staggering R1.1 billion.
“The decline of ArcelorMittal South Africa’s Longs steel business and its substantial operational losses of R1.1bn are deeply concerning, particularly for the automotive sector, which depends heavily on a reliable and cost-effective steel supply,” Seele said.
“The automotive industry requires virgin steel for production to meet the high-quality and safety standards demanded by vehicle manufacturing.”
Seele added that if local supply continues to decline or ceases altogether, manufacturers will be forced to import steel, thus inflating production costs and jeopardising the competitiveness of the industry on a global scale
“Currently, much of the steel available in South Africa is recycled and subsidised by the government, but it is not suitable for automotive manufacturing. The industry relies on virgin steel, which is essential for ensuring safety and meeting the rigorous standards required in the automotive production process,” he said.
The potential closure of Amsa’s operations not only threatens job security, with widespread retrenchments likely across the steel and automotive sectors but also poses a severe risk to regional economies.
“Job losses on this scale would have a domino effect, destabilising livelihoods and impacting related industries. This is a critical moment for all stakeholders – business, labour and government – to come together and find a viable solution. While there are talks of a potential R1bn bailout, nothing has been confirmed yet,” Seele said.
Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers (NAACAM), welcomed the temporary postponement of Amsas’ operations and stressed the necessity of maintaining dialogues with South African authorities.
“This critical commitment should sustain the industry for an interim period and help mitigate the immediate risks associated with the closure of the Longs Business, which included likely supply chain disruptions, component plant closures, vehicle production stoppages and potential delocalisation of both steel and finished automotive components,” he said.
Moothilal added that focus now needed to be placed on finding a long-term, sustainable solution to domestic long steel production.
“Additionally, during this interim period, support is needed for the SA autos component sector to transition into whatever that solution is, especially around material approvals and stockholding.”
Meanwhile, Morne Seaman, president of the Newcastle Business Chamber, expressed optimism regarding the one-month extension, highlighting ongoing conversations relating to a R1bn government bailout and broader rescue initiatives for the steel sector.
“Additionally, reports indicate that the government has provided a R1bn bailout package and is currently discussing a broader rescue plan. We remain hopeful that all parties involved will develop a viable and sustainable model for the steel industry,” he said.
Seaman added that as long as the 30% rebate on scrap remained in place, there was a significant risk that this situation could arise again in the future.
“A long-term solution is essential to ensure stability. If successfully implemented, this model could serve as a blueprint for other industries in South Africa.”
Seaman also said that small and medium-sized enterprises played a crucial role in the economy, contributing approximately 34% to the country’s GDP and employing around 60% of the workforce.
“Strengthening support structures across industries could drive sustainable economic growth and job creation.”
BUSINESS REPORT