The extent of the current mess may be a reflection of the desperate situation the government found itself in with Iscor in the mid-1990s and in particular with Iscor's plant in Saldanha Bay. Despite the injection of oodles of funds by the Industrial Development Corporation (IDC) and Iscor, Saldanha just kept leaking money.
The decision to split Iscor into two parts - comprising steel manufacturing and iron ore mining - was crucial to the steel group's prospects. The decision that Iscor would access cheap iron ore from the Sishen iron ore mine was also critical to Iscor's initial prospects and specifically to the Saldanha mill.
Legend has it that the government was also keen to prise control of the group out of Afrikaner hands, which may have seemed reasonable at the time given Iscor's profit record. And so we all ended up with an international group, ArcelorMittal SA, getting cheap access to the country's dominant steel group and to a seemingly unending supply of cheap iron ore. The new owner charges maximum prices in its determination to ensure an efficient operation. The benefits of these efficiencies are passed directly to its shareholders.
Right now what is most puzzling is ArcelorMittal SA's explanation that it did not renew the iron ore rights because it believed that was Kumba's responsibility. Given the importance of the rights this seems an inappropriately relaxed stance by the steel maker.
And given the talk of closing Saldanha, perhaps it is time to review the divestiture suggestions mentioned by the competition authorities a few years back.
Source busrep.co.za
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