ArcelorMittal South Africa Ltd. will shut its long steel products business and cut as many as 3,500 jobs, dealing another blow to the continent’s third-biggest economy.
South Africa’s failing power and transport systems as well as a skills deficit are thwarting efforts to revive the economy, with electricity outages and logistical bottlenecks hobbling the country’s industrial base.
Steel consumption — a proxy for the economy — has slumped 20% in Africa’s most-industrialized nation over the past seven years, the company said Tuesday in a statement. Long steel products are primarily used in construction. The steelmaker, controlled by ArcelorMittal SA, employed about 9,300 workers, including contractors.
ArcelorMittal South Africa’s shares plunged as much as 27% in Johannesburg, before paring those losses.
South Africa has been hemorrhaging jobs, with companies including Anglo American Plc and Sibanye Stillwater Ltd. also firing workers. The job cuts are a setback for President Cyril Ramaphosa and his ruling African National Congress, months before an election. Several opinion polls show the ANC risks losing its national majority for the first time next year, potentially forcing it into a coalition to retain power.
“If mining industry job losses are followed by job losses in other industries as well, then this will signal a slowdown in economic activity,” said Reezwana Sumad, senior research analyst at Nedbank Group Ltd. Given the worsening logistical constraints, companies that can’t get products to clients “will probably downsize, at least temporarily. This is particularly concerning in a country” where the unemployment rate is elevated, she said.
The job cuts may reverse post-pandemic employment gains. South Africa’s official jobless rate decreased to 31.9% in the third quarter from 32.6% in the prior three months.
The shutdown is also another reversal for ArcelorMittal, the biggest steelmaker outside China. Weak demand in Europe is curbing its profit, while the firm is set to lose its steel plants and mines in Kazakhstan following an accident that killed 46 people. ArcelorMittal fell 0.3% in Amsterdam trading.
“The ArcelorMittal South Africa board and management have reached this point after having exhausted all possible options,” Chief Executive Officer Kobus Verster said in the statement. “We have a duty to ensure that the business remains sustainable in the long term, in the interests of the company and its stakeholders.”
Source: BNN Bloomberg
