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How well intended people, and carefully maintained systems, have achieved nothing in three years – the tragic story of job losses in the power pylon industry

The futile  efforts over the past three years to protect 650 jobs in SA’s Power Pylon manufacturing industry is, indeed, a tragic one which could have been averted. This is the opinion of Southern African Institute of Steel Construction’s Kobus de Beer.

According to de Beer, the ESKOM requirements for manufacture and construction of new power lines, as well as upgrades and maintenance of existing lines, were, for many years, supplied by local manufacturers, albeit at relatively low levels of activity.

The new power stations being constructed by ESKOM, as well as the many renewable energy projects, require substantial investment in a network of new power lines. ESKOM set out these requirements systematically and they pro-actively convene regular meetings with industry to outline details of their future power line requirements.  “As expected these plans show considerable growth and sustained increased requirements over a period of up to ten years.  In practice, ESKOM has had to revise these plans downward every year since the build program achieved did not match expectations. The future requirements remain at high levels,” de Beer says.

During 2008 imports of fabricated power pylon steelwork rose to 12 425 tons from 1 041 tons the previous year, mostly supplied from India at extremely low prices (this later proved to constitute “dumping”).  Local industry found itself in the frustrating position of not participating in the growth of their own market.  The crisis did not improve in 2009 as overall activity levels were down.

In November 2009 BUSA (Business Unity South Africa) met with the Minister of Trade and Industries, Mr Rob Davies and tabled a list of 22 products / industries in crisis.  This was the result of extensive consultations with industry to select worthy “problem cases”.  The Minister studied these crisis cases and then advised the industries to follow the formal system of making applications through ITAC (International Trade Agreements Council), a Department working under the DTI (Dept. of Trade and Industry) administrating Trade Agreements and applying Ad Valorem Duties on imports.

During April 2010 a formal ITAC application was submitted.  The wisdom of having to do this was clear as the application demanded full information on the industry, a detailed listing with addresses etc. of the participants, breakdowns of people employed, past, current and future production volumes as well as cost and pricing structures.  This required considerable effort and investment on behalf of the industries, with care needed to stay within the constraints demanded by the Competitions Commission.

During August 2010 the application had finally been processed (the ‘normal’ processing period is 3 to 4 months) and it was gazetted for comment.  Again the system could only be admired since adequate opportunity was given for objections and further clarification – a process that closed in December 2010.   Imports of Power Pylon steelwork was at 6 052 tons in 2010.

In March 2011 the imposition of a 15% Ad Valorem Import Duty was gazetted, bringing these products in line with all other types of fabricated structural steel products.  ESKOM promptly applied for and received exemption of these duties on existing contracts, thereby limiting the effect of the increased cost of duties on electricity prices.

In October 2011 an application was prepared by the DTI working with industry for power line steelwork to be “Designated” in terms of Section 9 of the revised regulations to the PPPFA which empower the DTI to designate certain industries that are of ‘critical importance’ for local manufacture by organs of state and public entities.

In December 2011 Minister Rob Davies announced the designation of a number of products which included power pylons. A specific local content target is set for different products and in the case of power pylons it is 100%.  A further notice from the DTI allowed the import of the raw steel requirements as these would be deemed local content – this has not yet been used by any fabricator.   During 2011 imports of Power Pylon steelwork was at 15 857 tons.

During the first 11 months of 2012 a further 10 011 tons of imported power pylon steelwork arrived. ESKOM was very fairly exempted from the designation ruling on existing contracts and at one of the industry information sessions formally advised all its suppliers of the future designation requirements.

While all of this was in progress the total imports during this critical three year period was 31 920 tons!  Nothing visible was achieved as three companies closed down or had to change their activities resulting in at least 650 decent permanent jobs being lost for the period.

At the beginning of 2013 ESKOM had placed only 540 tons of new power pylon work in South African industry in terms of the designation directive.  Expectations are that little new work will be placed before mid-year, but that after that - now almost four years later - things will improve.  We live in hope!

So, ESKOM tries to work as cost effectively as possible, the Minister and DTI takes appropriate action insisting industries prove their cases, ITAC acts within the disciplined structures and prescribed timelines and the industry does whatever is required to survive, including importing from competitors.  This system has many redeeming characteristics, BUT IT TAKES FAR TOO LONG TO BE USEFUL. How do we explain what happened to the 650 breadwinners and their 2000 + dependents?

A major part of the answer lies in the recent introduction of the “Designation” concept and applying it quickly. The Minister and DTI are commended for this initiative and for extending it to other products and industries. Work is needed to add responsibly to the list and to extend similar local content specifications to all major buyers and investors in South Africa.

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