The Department of Trade and Industry is to launch a new incentive scheme to support the metal and engineering sector which has been severely affected by electricity price hikes and slowing demand in the mining sector.
The new incentive was announced by Trade and Industry Minister Rob Davies during his budget vote speech in the National Assembly on Tuesday.
He said the incentive would cost R500m this year and was meant to mitigate the effects of the import tariffs on the downstream steel sector.
The department is particularly concerned about the decline of foundries which‚ if allowed to continue‚ would result in deindustrialisation.
It wants to stabilise the sector. The incentive which will be matched against investments will aim at enhancing competitiveness in the whole value chain and will be tied to supplier development in certain cases.
“As we have shown with our clothing and textiles programme‚ judicious use of incentives and other industrial policy tools can stabilise sectors in distress and position these for growth‚” the minister said in his speech.
He said the incentive was very significant.
He explained during a media briefing ahead of his speech that government had been forced to protect steel producer Arcelor Mittal with import tariffs to preserve local steel production in the face of a global glut of steel.
If South Africa’s biggest steel producer had closed down‚ this would have had knock-on effects on the downstream sector and resulted in job losses. However the tariff increases had had a knock-on effect on the downstream metals sector. The incentive was intended to support the downstream industry.