1 00:00:00,000 --> 00:00:11,240 Hello and welcome to the So What podcast in which political economic analyst JP Landman 2 00:00:11,240 --> 00:00:16,400 discusses the issues uppermost in the minds of South Africans. You can find a written 3 00:00:16,400 --> 00:00:27,920 version of this content on JP's website jplantman.co.za. I am Ruda Landman and I am your host. 4 00:00:27,920 --> 00:00:36,280 This podcast, dated the 27th of January 2025, is titled AMSA, the sound and fury of a partial 5 00:00:36,280 --> 00:00:43,600 closure. We came back from a delightful holiday in Namibia and walked into a storm. What was 6 00:00:43,600 --> 00:00:47,720 it about? Was it just about steel factories closing? 7 00:00:47,720 --> 00:00:53,520 Ostensibly, yes. It was about the announcement by Arcelor Mittal, South Africa, which we will 8 00:00:53,520 --> 00:00:58,960 refer to as AMSA, closing their long steel business. But in reality, Ruda, it's about 9 00:00:58,960 --> 00:01:05,000 much more. It's about import tariffs, it's about protection of local industry, it's about 10 00:01:05,000 --> 00:01:10,240 localisation, it's about industrial policy. All these things came together in this AMSA 11 00:01:10,240 --> 00:01:16,400 issue and it's what we do in this note in January. We unpack all these issues a bit. 12 00:01:16,400 --> 00:01:21,240 Tell me about the origin and the history of AMSA, Arcelor Mittal, South Africa. 13 00:01:21,240 --> 00:01:26,360 AMSA started its life as YSKOR, the South African Iron and Steel Corporation, which 14 00:01:26,360 --> 00:01:31,840 was founded by Hendrik van der Bijl, the man who single-handedly industrialised South Africa 15 00:01:31,840 --> 00:01:37,740 way back in the 1920s. It became a big steel business in South Africa and it played a huge 16 00:01:37,740 --> 00:01:44,180 role in producing the steel and many steel products that you need in the modern economy. 17 00:01:44,180 --> 00:01:49,200 What I think is important to remember is that the old ISKOR consisted of two businesses, 18 00:01:49,200 --> 00:01:53,840 steelmaking, but they also had a mining side. On the mining side, they had iron ore and 19 00:01:53,840 --> 00:02:01,440 coal mines. The benefit of having iron ore mines is that you can buy or acquire the iron 20 00:02:01,440 --> 00:02:07,160 ore that you need for steelmaking cheaply. You have your own mines, you can make arrangements. 21 00:02:07,160 --> 00:02:11,160 That's the way in which the old YSKOR operated. 22 00:02:11,160 --> 00:02:14,640 Then, how did it become Arcelor Mittal? 23 00:02:14,640 --> 00:02:22,400 Yes, in 1989, ISKOR was privatised and listed on the JoBurg Stock Exchange. In 2001, 12 24 00:02:22,400 --> 00:02:28,880 years later, it was split into two separate companies. The one is YSKOR Steelmaking and 25 00:02:28,880 --> 00:02:36,400 the other one, Kumba Resources. They took the iron ore and coal mines. In 2004, Lakshmi 26 00:02:36,400 --> 00:02:41,640 Metal that we will talk about bought the company and they changed the name from ISKOR to Mittal, 27 00:02:41,640 --> 00:02:50,920 called Steel. In 2006, I think the problem started because then Kumba Resources itself 28 00:02:50,920 --> 00:02:57,720 was split into two companies, Kumba Iron Ore, which still exists today and is a very profitable 29 00:02:57,720 --> 00:03:05,160 miner of iron ore, and Exxaro. Exxaro Resources, as you know, is a mining and coal company 30 00:03:05,160 --> 00:03:13,840 also listed on the JSE. That's the history. This split up of Kumba between coal and iron 31 00:03:13,840 --> 00:03:20,760 ore had the effect that in 2010, Kumba Iron Ore cancelled the arrangement that they had 32 00:03:20,760 --> 00:03:26,760 with the old YSKOR or Mittal Steel to provide iron ore for the steelmaking on preferential 33 00:03:26,760 --> 00:03:32,040 terms. They wanted a much more market related agreement. There were court cases, negotiations 34 00:03:32,040 --> 00:03:41,800 and political interventions and so on. But in 2013, Kumba Iron Ore and Mittal Steel made 35 00:03:41,800 --> 00:03:47,120 an agreement where they still bought the iron ore from Kumba, but at much less preferential 36 00:03:47,120 --> 00:03:53,040 terms. That must have hit AMSA's or YSKOR's balance sheet considerably. 37 00:03:53,040 --> 00:03:57,880 Another thing that comes up in this whole conversation is the difference between long 38 00:03:57,880 --> 00:04:04,080 steel and flat steel. Explain that? Yes, as the names indicate, long steel is 39 00:04:04,080 --> 00:04:11,880 anything that is long. Bars that you use in reinforced concrete, for example, railway 40 00:04:11,880 --> 00:04:17,400 tracks, it's long steel. Anything like that goes through as long steel. Flat steel is 41 00:04:17,400 --> 00:04:23,080 basically sheets which are made, whether you use the sheet to fold it and use it for car 42 00:04:23,080 --> 00:04:28,920 manufacturing or whether you use the sheet to fold it into corrugated iron that you can 43 00:04:28,920 --> 00:04:34,560 put on a roof. It's basically long versus flat. Now, what AMSA is doing, they're closing 44 00:04:34,560 --> 00:04:38,880 their long steel business, but it's important to note that they're not closing their flat 45 00:04:38,880 --> 00:04:43,680 steel business. That will continue. What part of the business is the long steel? 46 00:04:43,680 --> 00:04:49,080 They don't disclose the numbers, but the general understanding in the market is that long steel 47 00:04:49,080 --> 00:04:54,880 is more than 50% of AMSA's business. It is a big part of the company. 48 00:04:54,880 --> 00:04:59,120 What is the global context? What's happening in other places across the world? 49 00:04:59,120 --> 00:05:03,640 What happened in the first half of the 20th century is that many, many countries in the 50 00:05:03,640 --> 00:05:09,600 world had the belief that just as you had to have a national airline to be a serious 51 00:05:09,600 --> 00:05:14,600 country, you had to have steelworks and you had to have your own steel company. Therefore, 52 00:05:14,600 --> 00:05:19,880 a lot of governments in the world created steel companies like the government here created 53 00:05:19,880 --> 00:05:25,400 e-score in the 1920s. Exactly the same story. Now, the problem is if everybody is building 54 00:05:25,400 --> 00:05:30,560 a steel factory, then there's huge overcapacity in the world. Many of these steel companies, 55 00:05:30,560 --> 00:05:35,720 particularly the government owned ones ran into financial difficulties. And there's 56 00:05:35,720 --> 00:05:40,680 an Indian entrepreneur, Mr. Mittal, who saw the opportunity. He started buying up the 57 00:05:40,680 --> 00:05:46,640 steel companies worldwide. And of course, he rationalized them, reduced the staff numbers, 58 00:05:46,640 --> 00:05:51,640 sweated the assets and he himself became fabulously wealthy. And in the process, he 59 00:05:51,640 --> 00:05:59,360 drove the consolidation of steel capacity worldwide. And this process has been ongoing. 60 00:05:59,360 --> 00:06:06,240 Mr. Mittal's rationalization drive was not the only one. For example, British Steel, 61 00:06:06,240 --> 00:06:12,880 which for a long, long time was the biggest steel company in the world, had massive rationalizations 62 00:06:12,880 --> 00:06:18,080 and buying up other companies and merging and so on. And in the end, they themselves 63 00:06:18,080 --> 00:06:25,200 merged with the Dutch steel company Koeninklijke Hoogovens and became Corus Steel. Corus 64 00:06:25,200 --> 00:06:31,120 Steel in turn was taken over by another Indian company, Tata. And what Tata did was to close 65 00:06:31,120 --> 00:06:37,680 down a huge amount of capacity. And today the UK, which once had British Steel and was 66 00:06:37,680 --> 00:06:43,880 a very, very big steel producer, today the UK produces about 25% of what they produced 67 00:06:43,880 --> 00:06:49,160 in the previous century. So a lot of capacity has been closed down worldwide. And this Lakshay 68 00:06:49,160 --> 00:06:56,000 Mittal initiative and the Corus Tata initiative is not the last. We've seen very recently 69 00:06:56,000 --> 00:07:01,880 Japan Steel, Nippon, once wanted to buy US Steel and it's a transaction that was vetoed 70 00:07:01,880 --> 00:07:07,440 by President Biden when he was still in office. And it all plays into this thing of overcapacity 71 00:07:07,440 --> 00:07:12,120 in the world, trying to protect jobs, trying to protect all industries. And it's an ongoing 72 00:07:12,120 --> 00:07:21,920 process. Was the closure of the, at least the long steel part of ArcelorMittal unexpected? 73 00:07:21,920 --> 00:07:29,040 But for people who were in the industry, we have a friend who used to be in steel construction 74 00:07:29,040 --> 00:07:34,560 his entire life, a civil engineer. After he retired from steel construction projects, 75 00:07:34,560 --> 00:07:40,440 he became a professor at the engineering faculty at Stellenbosch University. And about eight 76 00:07:40,440 --> 00:07:46,040 years ago, a long time ago, he guided one of his master's students to do a thesis on 77 00:07:46,040 --> 00:07:54,280 can you develop long steel products, particularly steel bars from welded steel? In other words, 78 00:07:54,280 --> 00:08:00,000 can you use flat steel products to produce a product which is normally made in long steel? 79 00:08:00,000 --> 00:08:04,400 And this was eight years ago. And I asked him, so what prompted you to guide the student? 80 00:08:04,400 --> 00:08:10,320 And he said, look, it was already clear 10 years ago that long steel is in trouble because 81 00:08:10,320 --> 00:08:15,560 there's this huge overcapacity worldwide. If you can import long steel from Indonesia, 82 00:08:15,560 --> 00:08:19,840 I'm just mentioning a name, or you can import it from India, why on earth would you make 83 00:08:19,840 --> 00:08:24,560 it in Vereneeneging? And he saw this coming. So for people in the industry, it wasn't quite 84 00:08:24,560 --> 00:08:25,560 a surprise. 85 00:08:25,560 --> 00:08:32,480 Then there's a whole raft of other players in the field called mini mills. What are they 86 00:08:32,480 --> 00:08:34,080 and what do they do? 87 00:08:34,080 --> 00:08:40,520 Steel is made from iron ore in a furnace and you get your products out in the other side, 88 00:08:40,520 --> 00:08:45,720 long steel or flat steel. But what you can also do is you can use scrap metal and you 89 00:08:45,720 --> 00:08:52,120 can use electricity at very high temperatures to melt it. So you put the scrap metal in 90 00:08:52,120 --> 00:08:55,520 on one side and the other side you've got steel products coming out. 91 00:08:55,520 --> 00:08:56,520 Recycling. 92 00:08:56,520 --> 00:09:00,840 Recycling basically. Now we haven't had mini mills in South Africa. It's a phenomenon 93 00:09:00,840 --> 00:09:07,220 of the last 10, 17 years to be precise. And how it works is like this. If you're a scrap 94 00:09:07,220 --> 00:09:13,280 metal merchant and you buy scrap metal from wherever in the public office it to you, you're 95 00:09:13,280 --> 00:09:18,600 not allowed to sell that or to export it. You first have to offer it to a mini mill 96 00:09:18,600 --> 00:09:23,600 in South Africa. And the price that you have to offer it is the international price of 97 00:09:23,600 --> 00:09:30,560 scrap in Rotterdam minus 30%. So in that way, the scrap dealers of course take a cut. They 98 00:09:30,560 --> 00:09:37,280 suffer a little bit. They can't now export at market prices. But the mini mills get it 99 00:09:37,280 --> 00:09:43,800 at Rotterdam minus 30%. So their input cost is much lower. And therefore a whole flourishing 100 00:09:43,800 --> 00:09:49,000 mini mill industry started to develop in South Africa. As I said, 17 years ago there was 101 00:09:49,000 --> 00:09:57,280 nothing. And today this policy of benefiting or helping mini mills has resulted in 50% 102 00:09:57,280 --> 00:10:01,640 more or less of long steel products in this country being made by mini mills. In the past 103 00:10:01,640 --> 00:10:07,160 20 years ago, 25 years ago, AMSA made the whole lot. Now their market share is down 104 00:10:07,160 --> 00:10:13,240 to probably less than 50% because there's also still imports. So the rise of the mini 105 00:10:13,240 --> 00:10:17,920 mills on the back of aggressive government policy has also changed the landscape quite 106 00:10:17,920 --> 00:10:24,240 considerably. Now these two elements of the mini mill policy, i.e. scrap metal must be 107 00:10:24,240 --> 00:10:31,520 offered at 30% discount and you cannot export it. The export ban and the price regulation 108 00:10:31,520 --> 00:10:36,000 go together. The question is, if you take those two things away, will the mini mill 109 00:10:36,000 --> 00:10:42,280 industry survive? And we just don't know. The current arrangement is scheduled to end 110 00:10:42,280 --> 00:10:49,360 in 2027. I think it's June 2027. But of course it can be renewed. Now Arsalan Mattal and 111 00:10:49,360 --> 00:10:55,240 many other players in the country are pushing very strongly that it shouldn't be renewed, 112 00:10:55,240 --> 00:11:00,680 that in 2027 this subsidy effectively for the mini mills should fall away. We will see 113 00:11:00,680 --> 00:11:05,840 what happens in two years time and we will have to see how many of the mini mills can 114 00:11:05,840 --> 00:11:10,920 survive. But I must just make one point quite clear. A lot of people think that the mini 115 00:11:10,920 --> 00:11:18,360 mills are just a sort of inferior operation. And that's not the case at all. Score metals, 116 00:11:18,360 --> 00:11:24,160 which in fact is more or less the same age as Arcelor Mittal or YSKOR, fall more or less 117 00:11:24,160 --> 00:11:32,120 at the same time. They are also now a big mini mill producer and they export high quality 118 00:11:32,120 --> 00:11:37,000 steel products all over the world, including to China. Now there can't be too many companies 119 00:11:37,000 --> 00:11:41,620 that export steel products to China. So it shows you it is possible to be a mini mill 120 00:11:41,620 --> 00:11:47,040 and run a highly sophisticated operation. That is quite possible. 121 00:11:47,040 --> 00:11:51,360 Does Arcelor Mittal itself play in this field? No, not at all. They never invested in the 122 00:11:51,360 --> 00:11:57,840 technology. Mini mills operates on entirely different machinery, entirely different technology. 123 00:11:57,840 --> 00:12:02,360 And no, they never invested money. And in fact, if you go through all the reports and 124 00:12:02,360 --> 00:12:07,120 so on, there's a lot of criticism of AMSA that they made the wrong capital allocation 125 00:12:07,120 --> 00:12:13,080 decisions over the years. People say they could have spent their money better and they 126 00:12:13,080 --> 00:12:17,640 would be a much more productive and a better steel producer today. Now I'm not wading 127 00:12:17,640 --> 00:12:23,080 into that argument. I'm just noting that those accusations are there, that they haven't 128 00:12:23,080 --> 00:12:27,400 spent their money in the most optimal way. What does the steel market in South Africa 129 00:12:27,400 --> 00:12:31,880 look like? How much do we use? What do we produce here? Do we import? 130 00:12:31,880 --> 00:12:36,640 Yeah, that's very interesting. We've got capacity between Arsalan Mattal and all the 131 00:12:36,640 --> 00:12:43,480 mini mills to produce 8.8 million tonnes of steel a year. Last year we only produced 4.1 132 00:12:43,480 --> 00:12:51,920 million tonnes, less than half. And of those 4.1 million tonnes, we imported 32% or about 133 00:12:51,920 --> 00:12:58,240 1.3 million tonnes. So that gives you the story. Now the steel people, AMSA in particular, 134 00:12:58,240 --> 00:13:02,080 argues that if the economy is growing at a higher rate, then there will be more demand 135 00:13:02,080 --> 00:13:06,000 for steel and things will be better. Well, that's of course true because steel demand 136 00:13:06,000 --> 00:13:12,160 is very sensitive to economic growth. 3% is much, much better than 1%. And as you know, 137 00:13:12,160 --> 00:13:18,880 we've been growing at 1%. That will change once you've got 3%. But does that mean that 138 00:13:18,880 --> 00:13:24,880 our full capacity will be utilised? Not necessarily, because as I've said, even under these depressed 139 00:13:24,880 --> 00:13:31,240 conditions, we import 32% of our steel. So if there's a bigger demand for more steel, 140 00:13:31,240 --> 00:13:35,920 you may find that your imports also go up. Why do we import if we have the local capacity? 141 00:13:35,920 --> 00:13:41,520 It's all about price and quality. So, you know, steel is not just steel. And steel products 142 00:13:41,520 --> 00:13:47,280 are not, all of them are not made the same. I'll give you two examples. In the old, in 143 00:13:47,280 --> 00:13:52,240 previous times, in the old South Africa, when we still built railway lines, we imported 144 00:13:52,240 --> 00:13:58,720 30 to 40,000 tonnes of railway tracks a year, because the old Iskor then couldn't produce 145 00:13:58,720 --> 00:14:05,840 them locally. Today we've got a very flourishing motorcar industry. We import about 300,000 146 00:14:05,840 --> 00:14:13,640 tonnes a year for steel that go into the assembly of motorcars. So either the prices locally 147 00:14:13,640 --> 00:14:19,280 cannot compete with foreigners or the quality is not there. So that's why you, that's why 148 00:14:19,280 --> 00:14:25,720 you have imports. And that will probably carry on even if there's a higher demand for steel. 149 00:14:25,720 --> 00:14:31,680 Could tariffs make a difference with President Trump at the moment, saying, seeming to think 150 00:14:31,680 --> 00:14:37,280 that tariffs are the answer, whatever the question? Look, at the moment there is an 151 00:14:37,280 --> 00:14:44,320 import tariff on imported steel of about 9%. AMSA says it's not enough. They want 25%. 152 00:14:44,320 --> 00:14:50,000 And that takes you to the heart of the matter. Do you force consumers to pay more for a product 153 00:14:50,000 --> 00:14:55,680 in order to protect the local industry or do you subject the local industry to competition? 154 00:14:55,680 --> 00:14:59,200 And there's no clear answer on it. There's no right or wrong. It's a public policy choice 155 00:14:59,200 --> 00:15:04,800 that you make. AMSA likes to point out that there are countries like Mexico, for example, 156 00:15:04,800 --> 00:15:11,440 where there's 82% import tariff on steel. We've seen that President Joe Biden refused to take 157 00:15:11,440 --> 00:15:19,040 over by nipping off US steel. So it plays into jobs, into politics, into protection, localization, 158 00:15:19,040 --> 00:15:23,600 that sort of story. In the end, I don't think tariffs will make much of a difference. That's 159 00:15:23,600 --> 00:15:29,440 the experience worldwide. In the end, you have to have the best product at the best price. And to 160 00:15:29,440 --> 00:15:33,680 get to the best product at the best price, you need investment. You need the latest technology. 161 00:15:33,680 --> 00:15:38,000 You need the latest machinery. You need best practice. If you don't apply that, 162 00:15:38,560 --> 00:15:40,960 then you're not going to make it irrespective of what the... 163 00:15:41,760 --> 00:15:46,560 And I suppose you need scale. And you need scale. Absolutely, 164 00:15:46,560 --> 00:15:50,640 there's a very important point. You need scale. And if your local economy is not big enough, 165 00:15:50,640 --> 00:15:54,960 well, then you must be good enough to export. And that brings you back to best practice, 166 00:15:54,960 --> 00:16:00,400 best product, and so on. Yeah, so scale is absolutely important. If we look at the world today, 167 00:16:02,240 --> 00:16:08,000 in many industries, for example, electric cars, the Chinese are just way, way ahead. What do they 168 00:16:08,000 --> 00:16:14,000 have? They have the latest technology, better than anybody else, including Tesla. And they have scale. 169 00:16:14,000 --> 00:16:21,680 And that enables them to produce cars to the extent that build your dreams. The EV manufacturer 170 00:16:21,680 --> 00:16:27,440 in China is outselling, has begun to outsell Tesla. That's what happens when you've got the 171 00:16:27,440 --> 00:16:33,040 technology and you've got the skills and you've got the scale. We also see it here in the poultry 172 00:16:33,040 --> 00:16:42,080 industry. Absolutely. Steel and chicken bring to the fore the same issues. We pay import levy on 173 00:16:42,080 --> 00:16:47,920 imported chicken. Chicken is the country's biggest source of protein. So now your consumers pay more 174 00:16:47,920 --> 00:16:52,320 for their protein than what they would have if they were no tariffs. On the other hand, you're 175 00:16:52,320 --> 00:16:57,040 protecting the local industry. And there's your choice. What do you want? Consumers pay more 176 00:16:57,680 --> 00:17:02,960 or subsidize the local industry? And again, there's no right or wrong. Make your choice. 177 00:17:02,960 --> 00:17:07,840 It's a public policy choice that you have to make. Shifting our focus back to steel, 178 00:17:07,840 --> 00:17:13,360 what's going to happen? What are the possible scenarios? Well, the interesting thing is for 179 00:17:13,360 --> 00:17:16,320 the short term, it's important to note that at the end of November last year, 180 00:17:16,880 --> 00:17:24,400 the revenue service imposed import tariffs on what is called structural steel products 181 00:17:24,400 --> 00:17:31,280 from China and Thailand. In the case of China, the levies are 52%. In the case of Thailand, 9%. So 182 00:17:31,280 --> 00:17:36,720 those are clearly two countries which export products to us very competitively. That's why 183 00:17:36,720 --> 00:17:42,400 they put it in. But that's a temporary measure for six months only while ITAC, 184 00:17:42,400 --> 00:17:47,920 ITAC is the International Trade Commission, investigate allegations of dumping and they 185 00:17:47,920 --> 00:17:53,520 will make recommendations. And then we will see which way it goes. So that's the one thing. 186 00:17:53,520 --> 00:17:58,880 The other thing to bear in mind, that's happening, the Chinese have built the ultra-modern steel 187 00:17:58,880 --> 00:18:04,800 plant in Zimbabwe. And they came into operation last year and those products have already started 188 00:18:04,800 --> 00:18:12,480 arriving in South Africa. So we can see steel imports from ZIM taking place here. A third 189 00:18:12,480 --> 00:18:16,720 development that's taking place, different Chinese companies are looking at building 190 00:18:16,720 --> 00:18:23,200 a steel factory in Limpopo. But there's huge, huge environmental resistance to it. So something that 191 00:18:23,200 --> 00:18:27,600 I was just wondering about is what are the possibilities that those steel companies are 192 00:18:27,600 --> 00:18:33,520 convinced instead of building in Limpopo, rather take over the plants that I'm so closing? 193 00:18:33,520 --> 00:18:39,840 Refurbish them, make them modern, put in new equipment and run with that existing infrastructure 194 00:18:39,840 --> 00:18:45,120 in terms of roads, railways, water and so on, rather than stuffing up the Limpopo province. 195 00:18:45,120 --> 00:18:48,160 But I don't know what will happen. We'll have to see how these things play out. 196 00:18:48,160 --> 00:18:52,160 Is that just a twinkle in your eye or do you know that something is happening? 197 00:18:52,160 --> 00:18:57,040 No, it's just a twinkle in my eye. I know that the Chinese are trying to build a steel factory 198 00:18:57,040 --> 00:19:00,960 in Limpopo and I know there's huge opposition. We'll have to see how that plays out. 199 00:19:00,960 --> 00:19:06,800 But it sounds as you've said that this is fundamentally about industrial policy and 200 00:19:06,800 --> 00:19:11,040 not just South Africa. It's a point of principle everywhere. 201 00:19:11,040 --> 00:19:17,520 Yes, it is. Now there's a very interesting Japanese economist, Richard Koo, who wrote 202 00:19:18,240 --> 00:19:23,760 some very interesting books on what he called persecuted economies. And what is a persecuted 203 00:19:23,760 --> 00:19:30,080 economy? It's an economy that had a golden era of manufacturing and industrialization. 204 00:19:30,080 --> 00:19:36,000 And then the golden era passed because new economies came up that were more efficient, 205 00:19:36,000 --> 00:19:41,440 more better technology, later equipment and so on and so forth. And they started persecuting 206 00:19:41,440 --> 00:19:47,600 the old economy. So the old economies, in a way he tells it, is the US, the UK, Europe, 207 00:19:48,400 --> 00:19:54,240 even to some extent Japan. Who are the new economies? Taiwan, South Korea, China and as 208 00:19:54,240 --> 00:20:01,600 we've seen Thailand. So they become to eat away. The hunters of yesterday have become 209 00:20:01,600 --> 00:20:08,640 the hunted of today and they're new hunters persecuting the old hunters. This is a fundamental 210 00:20:08,640 --> 00:20:14,560 development that's taking place worldwide. And it's happening in a large number of industries. 211 00:20:14,560 --> 00:20:21,360 For example, the German car industry, I think is in huge trouble as a result of competition from 212 00:20:21,360 --> 00:20:26,960 Chinese car companies who've built an enormous car sector. So the question is how do you position 213 00:20:26,960 --> 00:20:33,280 yourself in the light of that? And my own feeling is that it's no good trying to maintain that 214 00:20:33,760 --> 00:20:40,160 which comes from yesterday. Yesterday's industries cannot be sustained. There could be a transition 215 00:20:40,160 --> 00:20:45,680 period. There could be a time that you allow for adjustment, but in the end you cannot protect the 216 00:20:45,680 --> 00:20:51,840 old industries. You've got to develop new industries through innovation, new discoveries and so on. 217 00:20:51,840 --> 00:20:57,760 And that's where I think we have to focus. The persecuted economies had their golden era. It's 218 00:20:57,760 --> 00:21:04,800 over. They must now look at chips or satellites or you know what other industries there are in 219 00:21:04,800 --> 00:21:13,120 which they can excel. They can't excel any longer in the old industries. So coming to So What? How 220 00:21:13,120 --> 00:21:20,400 serious is this in the picture? The closing down of the Arcelor Mittal long steel business? 221 00:21:20,400 --> 00:21:27,120 Not as serious as the media for all rate suggested. First of all, Kobus Verster, the 222 00:21:27,760 --> 00:21:33,200 chief executive of AMSA, he himself has said that once they've closed down the long steel business, 223 00:21:33,200 --> 00:21:38,720 they can actually have a very flourishing flat steel business. So that's there. We know that on 224 00:21:38,720 --> 00:21:45,520 the long steel side, 50% of the product currently in the country is being supplied by minimal. So 225 00:21:45,520 --> 00:21:51,600 it's there. Thirdly, we know that there are strong imports and that we can import more from whatever 226 00:21:51,600 --> 00:21:58,080 we need from overseas countries. So I don't buy the narrative at all that the entire steel industry 227 00:21:58,080 --> 00:22:02,720 will now collapse. And with that, the further argument that manufacturing will collapse. 228 00:22:02,720 --> 00:22:10,080 I mean, for example, the automobile components industry, they lamenting and shouting and screaming 229 00:22:10,080 --> 00:22:15,680 and so on. But they also said the closure of Newcastle, if it can be postponed for 12 months, 230 00:22:15,680 --> 00:22:21,120 then minimals can be certified by the auto manufacturers for having the quality 231 00:22:22,000 --> 00:22:26,160 and the standard needed for the motor car industry. So that's a period of transition. 232 00:22:26,800 --> 00:22:30,320 You upgrade yourself if you're a minimal, put in whatever the auto 233 00:22:30,320 --> 00:22:36,880 makers want and lifeguard is on. Now, I think it's part and parcel of life where old industries die 234 00:22:36,880 --> 00:22:41,280 out and you adjust to new ones. Think of gold mining. There was a time when South Africa was the 235 00:22:41,280 --> 00:22:46,320 biggest gold producer in the world. Today, we don't really feature. Why? Well, because all the gold's 236 00:22:46,320 --> 00:22:51,520 been taken out. Industries arise, industries die. The question is, how do you adapt? 237 00:22:52,560 --> 00:22:58,720 And for you, you don't normally really put forward your opinion. You don't really 238 00:22:58,720 --> 00:23:04,720 put forward your opinion, but you do this time. What is for you the so what when it comes to public 239 00:23:04,720 --> 00:23:10,160 policy? No, I think we should focus on those. We should have an industrial policy. That's number 240 00:23:10,160 --> 00:23:16,960 one, not one based on subsidies and protection, but one based on developing new industries where 241 00:23:16,960 --> 00:23:25,200 we've got a competitive advantage. Now, I mentioned, for example, green energy. We are abundantly 242 00:23:25,200 --> 00:23:32,400 blessed with solar and wind resources. We can use that to build a green energy industry. We can 243 00:23:32,400 --> 00:23:38,960 build hydrogen, for example, tourism. We are abundantly blessed with tourism assets. With that 244 00:23:38,960 --> 00:23:44,880 comes conservation. So those are areas where we've got a competitive advantage. Then there are areas 245 00:23:44,880 --> 00:23:51,120 where the capabilities of the nation enable us to compete. For example, hospitality and personal 246 00:23:51,120 --> 00:23:57,040 services. Think of hospitals. People will tell you that the treatment they get in hospitals here are 247 00:23:57,040 --> 00:24:01,920 better than what they get in many European countries. So focus on that. Enable that kind 248 00:24:01,920 --> 00:24:08,080 of industry to grow and to expand and employ more people. Then there's arts and culture. I don't 249 00:24:08,080 --> 00:24:13,840 have to tell you about the success of something like Jerusalem and other South African artists. 250 00:24:13,840 --> 00:24:20,080 So instead of thinking just in terms of smokestack factories, think of these new industries that we 251 00:24:20,080 --> 00:24:26,080 have, which we can expand. Lastly, take agriculture. We've got a highly, highly successful 252 00:24:26,640 --> 00:24:32,000 agricultural industry. So if you're successful in agriculture, think of what is just next to it. 253 00:24:32,560 --> 00:24:38,800 Agro-processing. What can we agro-process where we have the competitive advantage that we can 254 00:24:38,800 --> 00:24:44,080 compete in the world? So that, I think, is the approach one must take. Is not to defend the old, 255 00:24:44,080 --> 00:24:52,240 but to develop the new and from there get economic development. Thank you for listening to the So What 256 00:24:52,240 --> 00:24:57,760 podcast. 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