The fate of ArcelorMittal South Africa (Amsa) may well come to symbolise the shortcomings of the country’s broader industrial policy. Despite years of effort and the publication of the national steel master plan in 2021, the company is still on the brink of shutting down its long steel business, unable to overcome structural challenges or secure sufficient support.
It’s not that the government hasn’t intervened — on the contrary, there’s been no shortage of state engagement, consultations, policy papers and emergency lifelines. But the reality is that industrial policy too often tries to micromanage outcomes rather than focus on building the underlying conditions that allow industries to succeed. The result is a patchwork of interventions that distort markets rather than develop them.
Nowhere is this more evident than in steel. To support steel producers, the government implemented the scrap metal price preference system and an export tax meant to lower domestic input costs — but this gave mini-mills a competitive edge over integrated producers such as Amsa, while doing little to improve overall competitiveness. Meanwhile, the downstream steel industry, which includes sectors such as construction, automotive components, fabricated steel products and appliance manufacturing, continues to complain about the high price and erratic availability of locally produced steel. These downstream users need competitively priced inputs to remain viable in both domestic and export markets. Protecting one part of the value chain at the expense of another ends up defeating the goal of industrial growth.
Ironically, South Africa’s steel ambitions were once a model of state-led industrial success
The deeper problem may be that South Africa has too small a domestic market to sustain a globally competitive primary steel industry. Steelmaking is capital-intensive, scale-dependent and brutally exposed to international pricing cycles. Competing with overcapacity in China or low-cost producers in Southeast Asia is a tall order.
Rather than doubling down on the struggle to sustain the entire steel value chain, policy should prioritise niche segments where South Africa may hold an advantage — such as stainless steel, with the country a major supplier of chrome ore, or specialised downstream fabrication industries.
Ironically, South Africa’s steel ambitions were once a model of state-led industrial success. Iscor, established in the 1930s to develop domestic capacity and reduce dependence on imports, expanded significantly during World War 2 and accelerated further through the high-growth 1960s.
However, its insulation under apartheid’s siege economy left it ill-equipped for the realities of a post-1994 era of greater global integration and competitive pressures.
Today, the state is again trying to intervene, but with less clarity of purpose. A technical working group comprising nearly every major government department — plus Transnet, Eskom, the South African Revenue Service, the Industrial Development Corp and Amsa itself — has been tasked with addressing policy obstacles.
Yet since the first major warnings from Amsa in late 2023, no effective action has materialised. Is the problem too many cooks, unclear mandates, or a lack of technical skill in the state apparatus? The IDC, meanwhile, has injected billions into the long steel division, despite holding only an 8.2% stake. Is bailing out a structurally uncompetitive business the best use of its balance sheet?
South Africa does not lack industrial talent. It has world-class private sector companies, skilled engineers and deep pools of entrepreneurial expertise. But the state needs to focus on its core functions: ensuring that ports work, that the rail network is reliable, that roads are maintained, that energy is stable and affordable, and that red tape doesn’t choke the investment process. Ultimately, enabling industries to compete is more productive than trying to manage them.
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