Supplementary Report of the Portfolio Committee on Trade and Industry on the revised Industrial Policy Action Plan (IPAP2), dated 21 September 2011

1. Introduction

As highlighted in the Committee Report dated 1 June 2010 on revised Industrial Policy Action Plan (IPAP2) (see ATC dated 1 June 2010) investment in the productive sectors of the economy is essential to arrest the decline of industrialisation and accelerate employment creation[1]. “A more labour-absorbing industrial policy .... with the emphasis on traceable labour-absorbing goods and services and economic linkages to promote job creation would place South Africa on a new growth path[2]”.

The sectoral approach of IPAP2 identified the following sectors – among other sectors – metal fabrication, capital equipment and transport equipment and automotives, components and medium and heavy commercial vehicles and the fruit and vegetable canning industry, which require steel as a key input into its manufacturing process.

The Portfolio Committee on Trade and Industry became aware of recent developments within the steel and iron ore industry and the potential impact it may have on various related value chains including those sectors mentioned above. As the IPAP2 is in its implementation phase, the Committee – as part of its oversight responsibility – provided a forum for the major industry players to discuss the issues at stake. A major concern for the Committee was the potential impact it would have on downstream industries and the key objectives of IPAP2 – the expansion of the manufacturing base and job creation, as well as job security. Monopolistic pricing of key inputs remains an obstacle in the manufacturing sector and therefore a potential obstacle to Government in achieving its developmental agenda.

The interim agreement reached between Kumba Iron Ore and ArcelorMittal South Africa (AMSA) had resulted in an increase in the price of primary steel products between 10 and 14 per cent above the previous international domestic basket price which AMSA was charging and about 2 per cent below import parity pricing[3]. In response to this, the Department of Trade and Industry (DTI) has requested the Competition Authorities to investigate potential abuse of dominance by AMSA in setting its steel price. In support of IPAP2, Government has been calling for a “competitive developmental price” to support local industrial development.

Of major concern to the Committee is the impact of the increasing prices of steel products on the national developmental agenda to provide support for downstream beneficiation which would lead to the development of a stronger manufacturing sector. Another concern to the Committee was that AMSA had threatened to immediately close the Saldanha Steel plant, with imminent job losses and production cuts from inland plants with the failure of negotiations on an interim price deal.

Furthermore, during its initial public hearings on the revised IPAP2, Eskom failed to timeously provide its response to outstanding questions raised during our engagement. This resulted in the Committee being unable to include the views expressed by Eskom on its contribution to IPAP2 in its report. The Committee noted that with increasing global awareness of the impact of climate change, business could be facing increasing impediments for their exports, where these are perceived to be environmentally unfriendly due to Eskom’s relatively high contribution to carbon emissions through its electricity generation activities.

2. Process

The Committee therefore invited ArcelorMittal and Kumba Iron Ore Limited to engage on the impact of these developments on the various related value chains as recognised in IPAP2. In addition, the Committee would like to engage on the two companies’ progress related to the implementation of IPAP2 to date and potential blockages that may arise.

The Committee also invited Eskom to brief it on its energy generation activities’ impact on climate change, as well as the introduction of renewable energy production (including the introduction of independent power producers into the electricity grid) and any adaptation and mitigation measures it has or foresees itself implementing or promoting to lower this impact. Of particular interest were areas that were already reflected within IPAP2. The Committee also invited the Portfolio Committees of Mineral Resources, of Energy, and of Public Enterprises to partake in the discussions with the stakeholders. However, due to prior commitments, the PC on Public Enterprises was unable to attend.

The inputs received from stakeholders were constructive but the pursuit of narrow interest was still prevalent, especially within the steel and iron ore industry. This assisted the Committee in developing a more balanced view on the current status within the steel and iron ore industry. Below is a summary of key points raised in the submissions.

3. Steel and iron ore industry

3.1. Developments within the steel industry since 2001

The “unbundling” of Iscor was completed in 2001 with the establishment of Kumba Resource holding the mining components and Iscor the steel components. Iscor nonetheless held on to a guaranteed supply of iron ore from the Sishen mine, at a highly advantageous price of cost plus 3 per cent. Also as part of the unbundling, Iscor acquired the IDC's (Industrial Development Corporation) 50 per cent stake in Saldanha Steel, a purchase completed in 2002. The “unbundling” of Iscor involved public developmental obligations, namely:

· To ensure the viability and cost-competitiveness of local steel production; and

· To ensure a competitive steel pricing regime to support the development and the deepening of value-added manufactured products in downstream industries.

In 2001, Iscor found itself with a new major shareholder in the form of LNM, parent company of Ispat, the number two steel producer in the world. In 2001, LNM Holdings B.V. (LNM) bought 34.8 per cent of the issued shares in Iscor and entered into a three-year Business Assistance Agreement (BAA). In accordance with the BAA, LNM would introduce efficiencies – through the provision of business, technical, purchasing and marketing assistance to Iscor – with the right to increase its shareholding.

A global turnaround in the steel sector saw a rise in the price of steel which increased the viability and profitability of the industry in South Africa. Furthermore, the import parity pricing (IPP) method practised by Iscor/LNM ensured high domestic profitability.

In 2004, LNM submitted an application to increase its shareholdings in Iscor to the Competition TribunaI. The government of the day was concerned that the IPP method was the most significant impediment to expanding downstream steel manufacturing. The DTI signed an agreement with LNM Holdings whereby the DTI supported majority LNM Holdings shareholding on the basis that it would[4]:

· Conclude a steel pricing agreement with the DTI that would replace existing import parity pricing (IPP) with a sustainable, developmental pricing model that would raise the volumes of downstream steel beneficiated in South Africa for both the export and domestic market in compliance with WTO (World Trade Organisation) Rules for the South African Steel industry[5].

· Increase investment in liquid steel capacity from 6 million tons (Mt) to 9Mt (including expansion of Saldanha Steel capacity to 2Mt from 1.2Mt.

According to the DTI, this agreement acknowledged that the prevailing pricing system (IPP) could not realise these downstream developmental objectives. This agreement was submitted to the Competition Commission for approval which was granted on 5/18 July 2004.

In terms of the unbundling agreement, AMSA had a so-called undivided share of 21.4 per cent of the Sishen mine, operated by Sishen Iron Ore Company (SIOC). In terms of the Sishen Supply agreement, 6.25Mt of iron ore per annum was to be supplied to AMSA. This provided a major cost advantage to AMSA which received its 6.25Mt at around $27 per ton, compared with an iron ore contract price of closer to $65 per ton with a spot price of $120 per ton.

Although the unbundling of Iscor was a commercial agreement between two companies, Government remains of the view that the national development obligations implicit in its approval of the agreement is not being met. A pricing regime that would pass on the low cost of iron ore to downstream manufacturers would increase the value-addition in the economy and promote job creation.

Since 2004, the DTI has been in extensive negotiations with AMSA (formally LNM) to enter into a “developmental pricing model” that would ensure that the downstream domestic purchasers do not become uncompetitive. The DTI has placed two proposals for consideration, namely:

· Export Parity Pricing; or

· A Basket Price comprising:

o 50% match in steel prices of major importers of metal and machinery products in South Africa; and

o 50% average of countries in lowest quartile of global pricing.

Both proposals were rejected by AMSA with AMSA unilaterally introducing an “International Basket Price” system. The international basket price is based on the average price that Germany, the United States, China and Russia provide to their local markets. AMSA maintained that there remains no link between its cost of production and domestic pricing of steel. Despite having production costs which were amongst the lowest in the world (due to the cost plus 3 per cent iron ore arrangement), it has consistently priced its steel amongst the highest in the world.

3.2. Engagement with the steel and iron ore industry

During its initial engagement, Kumba Iron Ore and AMSA pledged their support for IPAP2. AMSA alluded to the fact that pricing was not the only challenge faced by downstream industries but that other factors such as non-competitive cost structures, rail and port deficiencies and unfair competition in international markets[6] should also be considered. Kumba informed the Committee that it forms part of a critical value chain that provides inputs to value-added sectors that have high employment and growth multipliers[7].

Kumba in its presentation informed the Committee that in 2009 it exported 34.2Mt of iron ore and sold 5.8Mt to the local steel industry. Of the 5.8Mt sold to the local steel industry, 4.0Mt was sold under the long-term Sishen Supply agreement linked to AMSA’s former 21.4 per cent mining rights in Sishen mine. This agreement lapsed on 30 April 2010 as a result of the failure of AMSA to apply for the conversion of its 21.4 per cent mining rights over Sishen mine. The result was that the Sishen Iron Ore Company (SIOC) was no longer obliged to contract mine and supply AMSA with discounted iron ore. According to Kumba, the discounted price previously obtained by AMSA has not benefitted the South African steel end-producers and provided AMSA with an advantage over it domestic competitors[8].

The commercial dispute between Kumba and AMSA highlighted the importance of creating conditions for capacity and competition within sectors providing key inputs into the economy. The impact of the price of iron ore potentially could have a major impact in downstream beneficiation and the development of the manufacturing sector. The principle concern for the Committee is achieving the developmental objectives as outlined in the National Policy Framework (NIPF) and the recognition that IPAP2 could be the catalyst for a new economic growth path[9]. The key intent of the unbundling of Iscor was to ensure a viable and the cost-competitiveness of local steel production and a competitive steel pricing regime to support the development and the deepening of value-added manufactured products in downstream industries. Developments around the dispute between Kumba and AMSA with the threat of closure of certain mines put achieving the objectives of IPAP2 as well as the original intent of the unbundling agreement at risk.

In its submission to the Committee, Kumba[10] indicated that its contribution towards IPAP2 is through:

· Meaningful broad-based equity participation;

· Social development of communities located in areas surrounding its operations;

· An ongoing commitment to building capacity for future growth through strengthening the skills and human resource base; and

· Ongoing substantial investment in new iron ore projects and beneficiation.

Kumba also informed the Committee that it is involved in a number of downstream beneficiation initiatives and that the domestic steel price has and would not be influenced by the price at which it supplied iron ore and therefore should not have an impact on the development objectives. Kumba alluded that in the absence of competition in the domestic steel industry AMSA has been able to display monopolistic behaviour and has set domestic steel prices based on Import Parity Pricing (IPP). The reduction in the price of iron ore would have no effect on domestic steel prices and hence no effect on downstream beneficiation[11]. Kumba is of the view that the preferential iron ore pricing afforded to AMSA has not benefitted downstream users of steel[12]. It emphasised that finding a mechanism that supports downstream beneficiation without distorting the market is important.

In response to a question by the Committee in respect of the cancellation of the cost plus 3 per cent agreement and its impact on the national development objectives including the support for downstream manufacturing industry, Kumba informed the Committee that it had not cancelled the agreement but that in its understanding the agreement had lapsed as a result of AMSA’s failure to convert its old order mining rights. It is of the view that the discounted price at which iron ore was supplied to AMSA had not been passed on to downstream beneficiaries[13]. Hence, the preferential prices received by AMSA have had a distorting effect in the market and the lapsing of the agreements may foster competition within the industry[14]. AMSA has consistently argued that there should not be a link between the domestic price of steel and the cost of production. Since 2006, AMSA moved to a basket of international domestic prices at which our own domestic price is pitched. AMSA claimed that this method of pricing has provided downstream industries with a R9 billion advantage since its implementation. Furthermore, AMSA has been offering rebates to stimulate industry players that export products with a value-addition of at least 20 per cent, among other incentive schemes.

Kumba and AMSA have agreed on an interim pricing arrangement where ArcelorMittal would purchase its iron ore from the Sishen Mine at $70 per ton for its inland mills and $50 per ton for Saldanha Steel on a cash basis, compared to a previous cost of around $30 per ton. This arrangement would be in force until the end of July 2011. The interim pricing agreement supports the implementation of IPAP2 as it provides a secure supply of iron ore volumes and the supply of iron ore at a significant discount to current market prices. However, the Committee is of the view that the agreement does not ensure competitive prices, but only changes the division of monopoly rents between upstream producers.

A concern for Kumba is that other domestic steel producers[15] do not receive the same benefits as AMSA in that many of these purchase their inputs from third parties such as scrap steel suppliers at market related prices. Furthermore, they have not been treated on an equivalent basis with regards to AMSA. AMSA’s intention is to move back to the international domestic price basket model and would dedicate a portion of the export volume to a targeted industry or segment with preferential pricing to encourage the settlement of best practice manufacturing in South Africa[16]

South Africa’s comparative advantage in the abundance of mineral resources should be used to develop the economy rather than be captured by upstream producers. Kumba in its response informed the Committee that substantial investments are being made in new iron ore projects that would increase labour absorption capacity of the economy. In 2009, R3.2 billion was spent on preferential procurement.

The Committee is of the view that the original intent of the unbundling of Iscor is not complied with in that currently the local steel production sector is under threat. Kumba expressed its commitment to contribute in a manner that benefits the overall value chain. It shared that it was in ongoing engagements with possible new entrants to the steel sector with the potential of creating a sustainable downstream sector. A premise to ensure a sustainable steel downstream manufacturing industry is the efficient steel and iron ore supply chain not being characterised by distortions or subsidies[17].

3.3. Engagements with the South African Fruit and Vegetable Canning Association (SAFVCA)

The Committee engaged with the fruit and vegetable canning and steel construction industries regarding the impact of steel price and quality on their global competitiveness. Prof Don Ross and the South African Fruit and Vegetable Canning Association (SAFVCA) made presentations on behalf of canning stakeholders.

Fruit and Vegetable Canning

Prof Ross reported on a study that was recently conducted on the impact of steel prices on the canning sector in 2010. He indicated that South Africa exports 85 per cent of its canned fruit mainly to Europe and Japan. Part of these exports includes accessing highly profitable, premium markets. However, the sustainability of this access is dependent on maintaining economies of scale from producing for the mass market. In general, the canning industry faces three challenges, which often hampers additional investment, namely:

- Tariffs imposed by the European Union.

- Recurrent periods of Rand strength.

- The high price of cans.

In terms of inputs, cans account for 30 per cent of the cost of producing a can of fruit, and as AMSA produces 60 per cent of the steel used in producing South African tinplate, its steel price is an important determinant for the sustainability of the canning industry. The impact of increased steel prices during 2009 has been that the price of tinplate has increased by 68.9% leading to a 40 to 45 per cent increase in the price of cans and a 15 per cent increase in production costs.

Furthermore, AMSA has not invested in the latest technology to produce DR-plate, which is 0.16mm thick compared to its current production of SR-plate, which is 0.21mm thick. This is an additional impediment to the competitiveness of the domestic canning industry.

Given the demand elasticities in the EU market, fruit canners are unable to pass on this cost to consumers, as this would lead to a possible 22.5 per cent decline in demand. If the other two challenges occur alongside an increase in can prices, then fruit canners are under additional pressure to absorb the 15 per cent costs and the ‘loss’ due to the exchange rate appreciation, as well as the additional cost imposed by the tariff, which results in significantly lower margins. This may lead to lower investments in the industry, reduced production, lay-offs and/or plant closures as international demand decreases. The knock-on effects would be experienced in the agricultural sector, as farmers do not continue making medium to long term investments in orchards to supply fruit canners. These negative impacts would largely affect rural areas, where further job losses and withdrawal of investment would be particularly harmful for rural development.

Prof Ross indicated to the Committee that the Trade, Development and Cooperation Agreement (TDCA) should be renegotiated with the EU more firmly to improve market access for the industry. However, other markets should be built, particularly in developing countries, such as Asia, as countries increasingly start substituting canned fruit with fresh fruit as their average income per capita increases. Mr Nimrod Zalk, the Deputy Director General of the Industrial Development Division, indicated that the TDCA was an outcome of a negotiation that would never completely favour South Africa but should improve its circumstances. The current import duty was 10 per cent on canned goods beyond a certain quota.

The study estimated that AMSA was currently overpricing its steel by about 8 per cent, which would continue to harm sectors that use steel as a significant input. The impact of increased steel prices is not necessarily evident within other sectors using steel as an input but is a concern in the canning industry due to its sensitivities. Prof Ross indicated that AMSA has no reason to apply pricing similar to import pricing parity, as its pricing has no bearing on world prices.

The SAFVCA recognises that the canning industry can play a positive role in rural development if the industry has a favourable climate within which to grow. It has the potential to create jobs, opportunities for skills development, industrial upgrading, uplift rural communities and increase exports. They indicated that the local pineapple canning industry in the Eastern Cape has not resumed its operations, mainly due to the increased cost of cans and a major international company has disinvested in the country. It has proposed the following solutions to the steel pricing related crisis of the industry:

- Fair and competitive steel/cans pricing structure.

- Technological improvements in relation to tinplate (e.g. DR-plating) and can innovation.

- Increased competition in relation to steel/can-making i.e. more players.

- Investigate feasibility of canners investing in own can-making facilities.

- Support for the importation of tinplate and/or cans.

Prof Ross, responding to the Committee’s query regarding alternatives to cans, indicated that plastic was the main alternative. However, it was mainly used in high profit markets, which was a small proportion of the overall market. Mr Nassos Martalas

Prof Ross warned that companies may strategically respond to government’s industrial policy by capitalising on the resources government invests in such a policy. Therefore, the industrial policy must be fully applied to deal with these unintended consequences.

4. Eskom submissions

An increase in energy cost would pose a major threat to reindustrialisation of South Africa and could make the manufacturing sector unviable. However, given the effects of climate change and ongoing discussions at the international arena, IPAP2 recognised the imminent impact that South Africa’s relatively high level of carbon emissions could have on its economic landscape and thus the effectiveness of IPAP2. Therefore, continuing to use electricity and other technologies that do not consider the impact on climate change is unsustainable. Furthermore, the commercial reality exists for the development of “green” and more energy efficient industries.

Eskom in its initial submission informed the Committee that it intends to implement a procurement process that would be flexible for both closed and open tenders and would incorporate minimum thresholds to the necessary compliance criteria including Broad-Based Black Economic Empowerment (BBBEE) and securing local industry participation. Eskom asserted that the development of the South African Energy Industry is seriously curtailed by the absence of technical and professional skills. Other challenges included the increased cost imposed by local monopolies, e.g. steel, cement and certain chemicals.

Eskom’s Medupi and Kusile projects, which involve the establishment of coal-fired power stations, were projected to create 40 000 direct and indirect jobs. Fifty-seven per cent of localised content has been secured for the major build with a new local supply chain for boilers and turbine parts being created, which would benefit local business and address the industrialisation agenda. The implementation of a large capital expenditure programme requires that challenges for the local industries, such as the shortage of technical and professional skills are addressed across government departments using an integrated approach[18]. Eskom recognised these challenges and are in the process of aligning its activities with IPAP2. In partnership with the National Energy Regulator of South Africa (NERSA) and the Department of Energy, Eskom would roll-out the Renewable Energy Feed in Tariff (REFIT) programme to allow for the development of renewable Independent Power Producers and continues its roll-out of the solar water heating programme[19].

A significant global increase in the demand for energy is currently being experienced[20]. Climate change was a key priority for the organisation because of the long-term nature of the business of the power utility. Eskom acknowledged that it needs to operate and build within a carbon constrained environment and that reducing its carbon emissions is not only an environmental issue but an issue relevant to the sustainability of Eskom and the South African economy.

Eskom made significant strides in ensuring that the planning process takes into account a low carbon future and prioritising energy efficiency within Eskom and among other users. Its intention is to reduce its carbon footprint relative to its increase in production capacity until 2025 and thereafter continually reduce absolute emissions in support of national and global targets. A target has been set to increase energy efficiency with a saving of 5 500 megawatts in 10 years. Climate change necessitates the establishment of new power stations that use dry cooling technology as part of its adaptation mechanisms.

IPAP2 recognised the impact of the environment and climate change on economic development. Planning for a low carbon future requires an integrated approach at national level. Increased energy cost would have a negative impact on the manufacturing sector with the trade-offs between “cheap energy now” and increasing penalties on fossil fuels in the near future requiring national debate and resolution[21]. Eskom is embarking on research that seeks to address the impact of carbon and border taxes and the need for a low carbon future. This provides the opportunity for the development of new industries that would substantially increase energy efficiency.

The REFIT programme creates significant opportunities in the renewable market for solar heating, wind farms, biomass fuels, and Concentrated Solar Power (CPS) with the potential to create thousands of direct jobs. Eskom doubled its subsidy with respect to the solar water heating programme and it is working with service providers to assess the feasibility of employee programmes. The Committee raised concerns that there was a perception that delays in issuing long-term contracts for IPP would contribute to the deindustrialisation of South Africa. Eskom allayed the concerns of the Committee and attributed the delays to a lack of finance. Once NERSA approves the pricing provisions, IPPs could sign agreements with Eskom.

5. DTI’s response

The DTI informed the Committee that its focus is not on the current commercial dispute between Kumba and AMSA, but rather on giving effect to the intent of the 2001 unbundling agreement. The “unbundling” of Iscor involved public developmental obligations, namely:

· To ensure the viability and cost-competitiveness of local steel production; and

· To ensure a competitive steel pricing regime to support the development and the deepening of value-added manufactured products in downstream industries.

The DTI is of the view that although the 2004 agreement – when LNM acquired the majority shareholding in Iscor – did not explicitly stipulate the pricing conditions, it intended to reinforce the national development obligations embedded in the unbundling agreement of Iscor. Extensive negotiations since 2004 had not yielded the desired outcome and the current developments in the steel and iron ore sector is a major concern for Government as its impact could derail the objectives of IPAP2 which is the re-industrialisation of the South Africa economy and sustainable employment creation.

In response to the failure to reach agreement on the pricing model and the current development within the steel and iron sector, Government established an Interdepartmental Task Team (IDTT) consisting of the Departments of Trade and Industry, of Mineral Resources and of Economic Development to give effect to the original intent of the unbundling agreement. The IDTT’s mandate is to make recommendations on appropriate policy tools to ensure the national developmental obligations of the 2001 unbundling are given effect to over the long term.

In its response with respect to Eskom, the DTI informed the Committee that they are in the process of jointly identifying procurement areas that could be promoted in conjunction with the Department of Public Enterprises. With respect to climate change, the policy processes are being finalized by NERSA and the Department of Energy to have a more meaningful contribution to renewable energies and the solar water heating programmes. Currently, Eskom is looking at international donors for additional resources for the REFIT programme.

The Committee concurred that the IDTT approach is correct in dealing with the matter and that the IDTT should have a set timeframe for the completion of its mandate. The DTI confirmed that this was a matter of urgency for the Minister of Trade and Industry and his intention was that the task team should finalise its recommendations within the next two months.

6. Conclusions

The Committee concluded that without conducting an oversight visit to AMSA it would not be in a position to finalise its report and conclude on its findings. The price of steel was identified as a key impediment in the reindustrialisation drive to develop the economy and create sustainable jobs.

It became clear through the Committee’s engagement with AMSA during its oversight visit in 2011 that the matter with respect to the price of steel in support of downstream beneficiation which could lead to the development of a stronger manufacturing sector still remains a challenge. The limited information received from AMSA with respect to the determination of domestic prices led the Committee to conclude that their determination of the domestic price is not based on AMSA’s input costs including the low iron ore price.

The Committee is of the view that it is unacceptable that the upstream and downstream steel industry is being charged international prices and does not receive the benefit from the lower priced domestic iron ore. The Committee favours the pricing model by the DTI which broadens the number of countries in AMSA’s international basket and benchmarking South Africa’s steel industry to those in countries in line with South Africa’s developmental challenges. The Committee believes that the negative pricing impact of steel cannot be allowed to erode IPAP2 with the manufacturing sectors using steel absorbing part of this massive price increase or face, in some instances, severe constraints in their production.

The Committee welcomes the efforts to develop the critical economic principle of adding value to primary mineral resources and its potential for job creation. Given the potential labour constraints envisaged within the steel industry due to its aging workforce, the development of appropriate skills programmes should be commended.

The Committee acknowledged that it appears that no definitive response with regard to the steel price would be forthcoming, hence the need to address this impediment to ensure that the objectives of IPAP2 are not undermined. The Committee is of the view that in order to develop the manufacturing industry the domestic price of steel should be a key input that could contribute to the development of the sector. The Committee will continue to pursue to understand the rationale for the determination of the current steel price and to ensure that that the steel price is in line with the IPAP2 objectives. The Committee will also continue to monitor developments within the steel industry in line with its oversight responsibility over the progress with regard to the implementation of IPAP2.

The Committee would also like to encourage the Inter-Departmental Task Team on iron ore and steel to conclude on its findings as further delays may have a negative impact on the economy.

7. Acknowledgements

The Committee would like to thank all participants during these public hearings. The Committee also wishes to thank its Committee support staff, in particular the Committee Secretary, Mr A Hermans; the Content Advisor, Ms M Herling; and the Researcher, Mr L Mahlangu, for their professional support and conscientious commitment to their work. The Chairperson thanks all Members of the Committee for their active participation during the process of engagement and deliberations and their constructive recommendations made in this report.

8. Recommendations

Informed by its deliberations, the Committee recommends that the House request that:

8.1 Government review the regulatory environment within the steel sector in pursuit of a developmental steel price that would underpin IPAP2 objectives.

8.2 Government promote the development of alternative steel manufacturing facilities within South Africa.

8.3 The Inter-Departmental Task Team on iron ore and steel finalise its work and submit the report to the Committee.

Report to be considered.

References

AMSA response to additional questions date 25 August 2010

Cohen, T. (2010) Mittal SA wants discounted iron ore prices back. Business Day, 6 August.

Competition Tribunal, case,:08/LM/Feb04

DTI’s response

Eskom’s presentation dated 16 April 2010

Eskom’s submission dated 11 August 2010

Joint Statement from the DTI and LNM holdings

Kumba Iron Ore submission dated 13 August 2010

Kumba response to additional questions

PC on Trade and Industry report dated, 1 June 2010

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[1] PC on Trade and Industry report dated, 1 June 2010

[2] PC on Trade and Industry report dated, 1 June 2010

[3] Cohen, T. (2010) Mittal SA wants discounted iron ore prices back. Business Day, 6 August.

[4] Joint Statement from the DTI and LNM holdings

[5] Competition Tribunal, case,:08/LM/Feb04

[6] PC on Trade and Industry Committee report dated 1 June 2010

[7] PC on Trade and Industry Committee report dated 1 June 2010

[8] Kumba Iron Ore submission dated 13 August 2010

[9] PC on Trade and Industry Committee report dated 1 June 2010

[10] Kumba Iron Ore submission dated 13 August 2010

[11] Kumba Iron Ore submission dated 13 August 2010

[12] Kumba Iron Ore submission dated 13 August 2010

[13] Kumba Iron Ore submission dated 13 August 2010

[14] AMSA response to additional questions date 25 August 2010

[15] The domestic steel producers include Highveld Steel & Vanadium Corporation Limited (“Highveld”)[15], Scaw South Africa (Proprietary) Limited (“Scaw”), Cape Gate (Proprietary) Limited (“Cape Gate”) and Cape Town Iron and Steel Works (Proprietary) Limited (“CISCO”).

[16] AMSA response to additional questions dated 25 August 2010

[17] Kumba response to additional questions

[18] Eskom’s presentation dated 16 April 2010

[19] Eskom’s presentation dated 16 April 2010

[20] Eskom’s submission dated 11 August 2010

[21] Eskom’s presentation dated 11 August 2010