A steel company will receive a R1.683 billion loan from a development-finance institution.
ArcelorMittal’s South African division will delay the planned shutdown of two major steel mills by six months after a local state development-finance institution agreed to provide a R1.683 billion loan, and the government committed to resolving issues affecting the industry.
The loan from the Industrial Development Corporation (IDC) will allow ArcelorMittal South Africa (Amsa) to postpone the closure of its Newcastle and Vereeniging mills until at least 31 August, according to a company statement on Monday. This funding will prevent the immediate loss of about 3,500 jobs, as the company halts consultations regarding those layoffs.
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The mills, which produce long products, also supply essential steel grades for the country’s automotive, mining equipment, and construction sectors that local competitors currently cannot manufacture.
The South African government will use this delay to “quickly address” structural issues Amsa has highlighted for years, such as the influx of cheap imports, rising electricity costs, unreliable rail services, and government regulations that discount the scrap metal used by smaller local competitors to produce steel, according to the company.
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Amsa will also receive over R400 million from the government’s Unemployment Insurance Fund to cover workers' wages, the company stated.
In exchange, the steel producer will permit the IDC, which has encouraged Amsa to consider offers for its mills, to perform a due diligence review of its operations.
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Among the commitments Amsa said the government will fulfill is the review of a scrap steel export tax and a mandatory discount on scrap prices, which the company claims has unfairly benefited local competitors who recycle steel for their products. Amsa uses iron ore instead.
The company is also reassessing steel import tariffs to protect its interests.
The IDC funds come in addition to more than R1.38 billion in support provided by the state finance institution in June and February.
Amsa will also receive more than R400m from the Unemployment Insurance Fund to cover worker wages. Image: Sumaya Hisham/Reuters