Global steel producer ArcelorMittal announced that it would be closing down its Saldanha Bay operations recently, leading to a strong local and national government response. The company has reportedly cited the sluggish global economy as well as the Dollar-Rand exchange rate as factors reducing orders and ultimately leading to the company’s operations no longer being financially profitable. The mayor of Saldanha Bay is saddened by the decision as it will have a severe effect on the local economy and national government’s Trade and Industry minister, Ebrahim Patel has reportedly indicated that ArcelorMittal should sell the plant rather than close it and harm South Africa’s industrial capacity.
Fin24 reports that the company said its Saldanha operation has lost its “structural competitive cost advantage” to allow it to “effectively” compete in the export market. The company further added that the Saldanha operation was suffering “severe financial losses” which they could not foresee subsiding in the near future. Patel has indicated that he regards the looming job losses as a “harsh blow” to the local economy and South Africa’s progress in increasing its levels of development through industrialisation.
Saldanha Bay mayor, Marius Koen explained that ArcelorMittal is one of the biggest role players in the economy of the West Coast and that their closure will severely affect it.
Although saddened by the decision and concerned with the consequences, Koen added that local government has made attempts to avert the situation for some time.
“We had discussions with the executives to try and see if we could assist them, and we did, from our side, try to help them over a period of time,” said Koen before explaining that “It’s a private company, which means we can’t do anything about it if it’s not economically viable for them.”
The assistance mentioned by Koen included rebates and subsidies of over R700 000 per month.
Although direct job losses from the closure are potentially as high as 1000, the extent of job losses could be as high as 4000 if the entire chain of activity is accounted for.
Unskilled workers are projected to be the ones most severely affected by the closure of the Saldanha operation.
Meanwhile, the executive director of the Cape Chamber of Commerce, Sid Peimer is worried about the knock-on effect this closure will have on foreign investor confidence in South Africa.
“We’ve now got a company with an international footprint that’s decided its not worth producing steel in our region. That’s more worrying and affects many more people,” he said.
“Perhaps this is another wake up call that we have to be competitive in the global economy and relook at our labour policies. We have to get our act together or this could happen again with some more global industries who see us as a location they’d rather not invest in.”