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JEREMY MAGGS: The decline in jobs in the metals and engineering sector is nothing short of staggering, new figures from the Steel and Engineering Industries Federation of Southern Africa (Seifsa) show that just over 300 000 are employed right now, which is a significant drop from 500 000 a couple of years ago. So the big question of course is, can the industry survive?
I’m going to talk now to Tafadzwa Chibanguza, who is chief executive officer of the organisation. Firstly, a warm welcome, what are the main factors contributing to this situation?
TAFADZWA CHIBANGUZA: So the decrease has to be looked at in two phases. There’s the one that we reported on between 2008 and current, 2023, that’s where the numbers went from 577 000 to 362 000, that’s the current number. So you’ve got a decline of about 214 000 jobs there. In that first round, it’s really been the issues plaguing the local economy, low GDP growth and particularly low growth fixed capital formation or spend, both at a state as well as at a private sector level.
Then also what we saw is around about that 2008 period, we saw there was a deep structural shift between the export market shifting from the majority of products going to the EU and the bulk now going into Africa. So while that’s an opportunity in itself, the volumes also decreased.
So [we] have that structural decline continuing.
Also, we know from 2008 is when the electricity crisis started deepening. You’ve got Transnet’s issues also particularly worsening from about 2015 onward. So it’s really the underlying structural headwinds facing the economy that have been driving this number and naturally being a real sector economy, it responds to economic activity and we haven’t seen that and, hence, the decline.
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JEREMY MAGGS: And all of those factors, of course, remain. So you’re not arresting that decline in any way significantly, are you?
TAFADZWA CHIBANGUZA: Correct. That’s a good point. That then in fact talks to our next numbers that are looking forward. So the second phase of the numbers that are captured in that piece there basically says in the absence of reform, that’s number one, but you also now have the ArcelorMittal development that’s come to the fore, then if you take the combination of if you project out the rate at which employment has been decreasing, which one can conceivably project out that number in the medium term in that reform takes a while, so you project out the historic job losses and keep that rate.
You then also modify it for the impact of the ArcelorMittal closures. Then what that then does is it gives us a number in the order of about 48 000 jobs. That’s direct jobs. Then when you apply the economic multipliers of this sector across the economy, that’s how you get to that 290 000 jobs. So it’s an important point maybe just to close out on is that the 290 000 is an economy-wide job loss, which includes the direct of about 48 000, and then the balance being the indirect induced jobs.
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JEREMY MAGGS: Against this backdrop, do you believe the industry can survive?
TAFADZWA CHIBANGUZA: In the absence of reform, history is a perfect indicator of the fact that if what we are currently experiencing as in economic headwinds, if that continues in the absence of reform, then we are talking continued deterioration and basically the sector being unable to survive. But the rider there is that in the absence of reform, because the history has already indicated the fact that this structural decline has continued, so that is not even a subjective point one is making.
So looking forward, in the absence of the two critical areas on energy and rail, I think those are the two main ones.
There’s a third one that is creeping in quite a bit, which is the local municipality deterioration…
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That’s really where the rubber hits the tar from infusing costs into the manufacturers that operate in the different municipalities, and that affects competitiveness. So the combination of those three, [if not] arrested in terms of the decline that they’re contributing, will continue to see the sector deteriorating to the numbers that I’ve already mentioned.
JEREMY MAGGS: When you raised this issue, either with national or local government, given the two types of problems that you’ve outlined, do you have any confidence that you’re being heard?
TAFADZWA CHIBANGUZA: To be honest, I have to say that that ear turned the corner, in terms of being heard. So historically, I think you generally felt this wall that you were hitting into when raising these issues and the solutions and much of the solutions include a lot more private sector participation on rail, on energy and the rest.
What we are seeing that we are beginning to be heard is that we see it with the reform on the energy side.
We see at least early-stage signals of reform on the logistics side, particularly if you consider what Treasury has said that Transnet’s bailout is conditioned on private sector participation. On the local municipalities, not so much. So the point really I’m making is that they’ve been forced into looking at the alternative, which is bringing in private sector because the rate of deterioration is so much.
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JEREMY MAGGS: Let me pick you up on the private sector, all very well, but it’s not a panacea for a complete fix here, given that the private sector is reticent to get involved because of the pace of change that is needed in order to make a solid investment.
TAFADZWA CHIBANGUZA: Fair point. But what you have seen, and we are involved in a number of work streams directly as Seifsa with the Presidency around work streams to unlock our involvement in a number of, some are project based and some are at a higher level. We are involved directly as Seifsa again in the National Energy Crisis Committee (Necom). But to answer your point more directly, is that the involvement of companies now, particularly where they’re making offers at local government level, goes again to the point that that’s where the rubber hits the tar and that’s where they’re feeling the most amount of pressure.
So where they can get involved, they’re doing not only for – it mustn’t come across in a controversial way – but it’s not for profiteering, one, nor is it for patriotic reasons, but really it’s to just maintain their survival, for their own survival, that’s the reason why they are involved.
I could give you one practical example of a large multinational that had an insurance audit and on the day of that insurance audit, there was no water coming to the site and of course then they were then put on provisional insurance until they had a solution. R20 million later, they now have an onsite solution because it’s a fire risk.
So the point really I’m making is that that’s the type of micro-level impact of local government impact. We see a number of companies putting their hands up to participate, at least in arresting some of these declines, and our role as then organised business is to aggregate those offers of assistance and bring them to the fore to our government counterparts.
JEREMY MAGGS: Tafadzwa Chibanguza, thank you very much indeed, CEO of Seifsa.
