Rust belt yet to share in Amsa’s turnaround
East Africa gives steelmaker the growth that SA cannot
Scrap-metal yards, young men waiting at intersections to pilfer from steel transport trucks, a failing sewer system and youth unemployment are the order of the day as one drives along the potholed roads of Vanderbijlpark home to ArcelorMittal SA (Amsa), the country's largest steelworks — in Gauteng's rust belt.
Amsa is profitable for the first time in nearly a decade, which may be due to a boom in East Africa.
At home, however, it faces problems, and the local communities who rely on it are still feeling the effects of the past decade.
Africa's largest steelmaker this month reported its first full-year profit since 2010, owing to good steel prices, increased exports and increased overall sales. The company has seen its fortunes improve dramatically to report headline profits of R968m, up from a loss of R2.5bn a year ago.
But CEO Kobus Verster admitted that the communities in which Amsa operates — Vanderbijlpark and Vereeniging in Gauteng, Newcastle in KwaZulu-Natal and Saldanha in the Western Cape — have seen depressed economic activity as the company has struggled to regain profitability over the years.
Wiseman Duma, who operates his steel fabrication business, Zabele Engineering & Projects, with his partner out of Amsa's Incubation Hub, says: "Business in Vanderbijlpark is tough. The competition is tight because many of us do similar things. We're venturing out to KZN and Mpumalanga for opportunities."
Duma said the business was targeting more than R4m in revenue in the current financial year, from R2m in 2018.
Freddie Swart, group transformation manager of Amsa, said the company was trying to find ways to revive economic activity in its communities through incubation projects, integrating local businesses into its supply chain and engaging with investors on bringing more investment to Vanderbijlpark.
The depressed economy is evident in the theft of steel products and scrap metal. Trucks leaving the steelworks are sometimes accompanied by armoured vehicles to prevent theft of the products en route.
Trucks transporting scrap can have their loads lightened as people at intersections climb onto them and throw off as much as they can, jumping off at the next intersection and running back to collect the loot.
Vereeniging has also been affected by the troubles Amsa has faced, with the plant accounting for most of the job cuts at Amsa. The steelworks restarted last month after being closed since 2015.
The Vanderbijlpark operation employs 4,300. Werner Venter, general manager at Amsa's Vanderbijl Steelworks, said business had been depressed in the area, but since the recent results from Amsa, business confidence in the area has lifted. He estimates the company will be profitable this year.
In the past decade Amsa's share price slumped 98% from a 2008 high. Supplying more than 60% of the steel used in SA, the company is a good indicator of the industry's health. Other steel players have fared even worse, with Evraz Highveld Steel now in business rescue after its operations were ravaged by seven years of successive losses up to 2016, cheap steel imports and a downturn in commodity prices.
Amsa has been assisting Highveld Steel by supplying it with some raw material and helping to sell some of its products.
Amsa said exports of steel have risen 21% at a time when domestic demand for steel is down 4%. Verster said a significant portion of the exports were due to demand from East Africa, specifically Kenya, Tanzania and Uganda. "Those countries are growing at decent rates," he said.
Lisa Brown, a country risk analyst at RMB, said: "For the last four to five years, in Kenya and Tanzania in particular, there's been a big drive towards infrastructure investment." This included major rail and port projects supported by foreign funding...