Joanne McIntyre - 28 September 2017
South Africa’s stainless industry is centred on fabrication and value-adding activities. Given the tough economic climate it has endured over the past 18 months, Stainless Steel World spoke to two experts from the Southern Africa Stainless Steel Development Association, Executive Director Mr. John Tarboton and Market Intelligence Specialist Ms. Lesley Squires, about the current market situation.
The Southern Africa Stainless Steel Development Association (sassda) has 390 members, with 62% of those involved in converting primary products to finished products. That conversion industry is responsible for 35,000 jobs and 15 billion rand (USD $1.13 bn).
“Before the financial crisis stainless steel consumption peaked at 157,000 tonnes, while post-crisis in 2014 consumption peaked at just below 200,000 tonnes,” explains Mr. Tarboton. “However in the last two years there has been a dramatic drop, with consumption in 2016 at around 102,000 tonnes. This was due to a combination of low commodity prices - translating to very little investment in mining across Africa and indeed the globe - and a lack of infrastructure spending by our government. Historically, South Africa was a net exporter of stainless steel finished products, whereas last year we changed to being a net importer, particularly from China.” “The economic forecast for the remainder of 2017 is for growth of just under 1%.
However, there is a lack of consumer and investor confidence combined with uncertainty as to how future government policy will affect spending. Political uncertainty is taking its toll; the ANC Elective Conference takes place at the end of the year, there are debates around State Capture vs clean government, and in 2019 we have the general election.”
Areas of growth
Despite these factors Mr. Tarboton is optimistic that the local market will recover somewhat next year. “In 2018 South Africa will begin a project to rebuild its rail transport and make it the backbone of the country’s transport system. The passenger cars will be constructed of stainless steel grade 301 so this will be a boost to the local market.” “Architecture, building and construction is one of the sectors enjoying the most growth in South Africa at the moment, particularly in coastal areas. Across Africa other strong sectors include water & sanitation, food & beverage, agro-processing and pharmaceutical. There are development infrastructures lacking in Africa that present enormous market opportunities both for our members and for various export-oriented sectors of the South African economy. The best performing of our members are those offering more than just products, such as bespoke designs and specific solutions. This gives them a competitive edge.”
Sub-Saharan value chain
The sassda organization is working hard to integrate the stainless steel value chain across sub-Saharan Africa and even globally, to the benefit of all links in the chain. Market Intelligence Specialist Lesley Squires explains: “Our aim is to assist members in establishing and strengthening product value chains, and identifying infrastructure and industrial projects on the continent. We are already seeing positive results with projects running in Cote d’Ivoire, Mozambique, Tanzania and Kenya. Trade with our neighbouring countries presents opportunities for sustained growth and development with enormous potential for future economic partnerships and investment.” She went on to give some examples; “We’ve just welcomed new members from Kenya who are fabricators for the food & beverage and dairy industries.
We’ve been active in Zambia for five years, particularly for the mining industry, and are working on integrating the value chain with components being manufactured in South Africa and exported to Zambia for further fabrication. A major development is a long-awaited LNG project in northern Mozambique; where in June 2017 Eni signed an agreement signed with the Mozambique government for the offshore phase of the project. The onshore phase will stimulate significant infrastructure projects including hotels, housing and hospitals, all of which will require stainless steel. Other Mozambique projects include the development of a steel plant commencing January 2018 and a Vanadium processing plant is set to follow which will involve a lot of stainless fabrication.”
With just one stainless steel producer in South Africa (Columbus Stainless), the industry is largely made up of fabricators. Mr. Tarboton continues: “Generally in Africa, finished products are imported ready to be installed. Inevitably this will change over time as countries start to develop their own stainless steel fabrication capabilities. For example in Nigeria, all the stainless steel balustrades are imported although they could in future be fabricated locally as they recognise the need for industrialization for long term growth. This is why it’s important that our members create partnerships across the continent so they can do partial fabrication here, and the assembly of final components somewhere else, etc. To this end we have developed extensive training courses. Once people know about and understand stainless steel they will specify and be comfortable working with it. Education must come first.”
Predictions for the future
“Experts are predicting that commodity prices will slowly improve, in turn driving investments in mining,” continues John, “although the general election in 2019 may cause some uncertainty. Looking ahead five years we will be well down the road to growth again. Our Minister of Trade & Industry, Dr Rob Davies, has a unique view of how South African industry can grow in the future. He launched a program in 2016 called ‘Trade Invest Africa’ and has stated “we are not the supermarket for the rest of Africa. We must move into Africa and partner with the other African countries, respecting their culture and working with them, to the benefit of both parties.” We wholeheartedly agree with this sentiment,” he concludes.
John Tarboton, Executive Director, sassda