Developments in the South African steel industry offer a glimpse into the pressures being faced by the manufacturing sector as a whole, and the likely industrial and trade policy responses to those pressures.

The first thing to recognise is that there is no such thing as a homogenous ‘steel industry’. Yes, the macro themes of oversupply, import competition, and deteriorating power and rail utility services and costs are common across the sector. However, a company’s assessment of what policy response is appropriate depends entirely on that firm’s positioning within the sector.

Large upstream producers believe the answer lies in tariff protection and import substitution. Downstream fabricators want their steel inputs to be as cheap as possible and, thus, prefer protection to be applied on intermediary or final products rather than on inputs. Smaller firms want cheap inputs and are desperate for consistent market demand, which is highly growth dependent, and are thus highly sceptical of tariffs and duties that could dampen growth.

Therefore, it is impossible for the policymaker to satisfy the ‘steel industry’ as a whole. What it has to do is weigh up the trade-offs and intervene in a way that ensures the net growth, employment and industrialisation outcomes are positive.

In the South African context, those trade-offs are now front and centre for the Department of Trade, Industry and Competition (dtic) and the International Trade Administration Commission of South Africa (Itac) as they prepare to make industrial and trade policy decisions that will have far-reaching consequences.

On the industrial policy front, the dtic will need to make a call within weeks about the future of ArcelorMittal South Africa’s (AMSA’s) Newcastle mill, in KwaZulu-Natal. Should it be saved? Should the financial exposure of the Industrial Development Corporation to the mill be increased? Should the price preference system for scrap and the associated export restrictions, which AMSA blames for Newcastle’s lack of competitiveness relative to scrap-based producers, be overhauled or abandoned?

Then there is the issue of import substitution. What should the regulations look like now that the Public Procurement Act is in place? Which products should be stipulated for local supply? Are the local-content designations that were agreed for the steel sector specifically still relevant? What price premium should government accept to drive industrial development?

On the trade policy front, meanwhile, Itac has some big decisions ahead. Should it proceed in recommending the implementation of the sweeping tariff hikes outlined in a preliminary determination following a review of the steel tariff structure? Should the rebate system be expanded to provide something of a relief valve in cases where domestic industry cannot supply? Does Itac have capacity to administer more permits? Should the protection emphasis be weighted towards the upstream or the downstream? Should the issuance of import permits be contingent on firms meeting other social objectives of government? Should more consultations be held?

South Africa’s future industrial landscape truly now rests on the answers to these pressing questions.