Finance and Economic Opportunities

1. What are the main (a) drivers, (b) rationale, (c) principles and (d) desired outcomes set for this task team to achieve?

Background

As part of DEDAT’s work in the Saldanha Bay area, especially around industrial development in the West Coast, the Department of Economic Development and Tourism (DEDAT) has consistently been engaging with ArcelorMittal South Africa (AMSA) over the past number of years. Recently, very close collaboration was also maintained around the water crisis, drawing in the Saldanha Bay Municipality (SBM) and the West Coast District Municipality (WCDM) around security of water supply.

Since the water crisis, DEDAT has been engaging with the senior management team of AMSA, which included a meeting with the Chief Operating Officer and the Saldanha General Manager on the 15th of July 2019. Discussions were focused on the major constraints faced by the Saldanha plant and initiated correspondence between Minister Maynier and Minister Patel about possible solutions to cost escalations in energy (Eskom) and logistics (Transnet).

Once AMSA announced their asset review and potential restructuring, inclusive of a possible closure of the Saldanha Plant, these engagements intensified, with a number of meetings and direct telephone conversations between Minister Maynier and the AMSA COO (September to October 2019) as well as more specific correspondence to both Minister Patel and Minister Gordhan about the importance of the steel plant to the economy of the West Coast and to support AMSA’s applications for some relief on the cost of electricity. DEDAT also continued to engage with AMSA at national and local level, as well as with the Department of Trade and Industry throughout the last quarter of 2019. This led directly into the first multi-stakeholder meeting on 29 November 2019, led by WC Minister of Finance and Economic Opportunities, and shaped the work streams of the Task Team.

1. 1. Drivers for the establishment of the Task Team and its rationale – the closure of the Saldanha AMSA plant

The AMSA task team was established by Minister Maynier on the 29th of November 2019 in direct response to the announcement that ArcelorMittal (“AMSA”) would be closing their plant in Saldanha Bay Municipality from January 2020 mainly due to global economic downturn which negatively impacted on its sustainability and profitability.

The Saldanha plant employed 568 staff members at November 2019, for which AMSA had determined the following retrenchment process:

• December 2019 – January 2020: Voluntary retrenchment of estimated 50 people.
• February – March 2020: First cohort of estimated 200 people retrenched.
• April – May 2020: Final Cohort of estimated 200 people retrenched
• Ongoing: 10 – 20 people would remain employed by the plant for various matters.

In addition, the Saldanha plant is a service provider to important Western Cape (WC) and SA industries; has numerous supplier companies (smmes) reliant on it for their main source of income; and has a significant impact on export numbers for the Western Cape. Its closure could therefore significantly impact on other businesses resulting in further job losses (estimated at an additional 1 000 job losses).

The Task Team was therefore established to:

• support measures for alternatives to the closure by looking at a sale and/or repurposing of the plant; and
• implement interventions that could mitigate the negative impact of the closure, inclusive of accelerating investment into the region outside of the plant that could ‘absorb the shock’.

1. 2. Principles and Desired Outcomes of the Task Team

The AMSA task team Initiative undertook various interventions aimed at supporting AMSA employees, businesses negatively impacted on by the closure, and citizens within the region broadly who could potentially face socio-economic challenges arising from the closure.

On fastidious analysis of the challenges from a holistic perspective, the AMSA task team identified both immediate, and more medium to long-term areas as core areas of outcomes.  Additionally, the AMSA task team liaised closely with the dti with the objective of finding a solution(s) that could keep the plant operational; avoid retrenchments; and/ or create new opportunities for specifically business and employees reliant on AMSA.

Interventions were identified and categorised in terms of its immediacy and urgency of realisation.  The interventions and its desired outcomes are as follows:

Immediate Interventions:

1. Support to the worker: The purpose of this intervention is to promote career resilience amongst the affected workers (inclusive of the wider eco-system) through the provision of support and information to workers faced with retrenchment. The desired outcomes are therefore that workers are able to find new opportunities – either in terms of new employment, up or reskilling, or establishing a business. In this process, the Task Team coordinated and leveraged an array of government sources of support (e.g. Social grants, Home Affairs, health etc.), inclusive of the workers understanding their rights (e.g. Department of Labour support).  This intervention was also mindful of the potential effects that AMSA retrenchment and economic hardship would have on families and communities, and thus the intervention incorporated a response to societal challenges arising in the medium to long term (e.g. alcoholism, financial literacy etc.).

2. Support for affected SMMEs and contractors: The purpose of this intervention is to provide support (e.g. B2B matchmaking to alternative opportunities/ assistance to business in distress) and information to the affected contractors in order to reduce the impact of the retrenchment and job losses.

3. Support for downstream industries: The objective is to determine how companies who obtain their input supplies from AMSA are affected and find mitigation measures to minimise the impact (e.g. B2B matchmaking for new suppliers; accessing rebates etc.).

4. Mitigation of potential environmental impact: The objective is to determine the environmental obligations of AMSA, cost these obligations as far as possible and to ensure that AMSA is accountable for its environmental obligations.

5. Support to AMSA plant: The main thrust of this intervention was to identify potential opportunities/ models/ approaches in order to keep the plant operational.

6. Communications: The key objective of this intervention was to ensure coherent and accurate communication, as well as to promote and foster business confidence in the area.

Short and Medium-Term Interventions

1. 1. Attracting Investment: Additionally, a number of investment projects were identified, which if successfully landed in the area as soon as possible, could absorb the shock to companies and employees impacted on by the closure of the AMSA plant. These investment initiatives include those already being facilitated by the SBIDZ as well as new opportunities identified.  The expected outcome would be job creation and rand value of direct investment.

(2)        Has the task team had any engagements with the stakeholders or social partners (i.e. the government, intergovernmental relations, the private sector, labour and the community); if not, why not; if so, what are the relevant details?

            Partnerships have been established or leveraged with an array of organisations, stemming from local government, provincial WCG departments, national government departments, agencies such as SEDA and SEFA, community and religious-based organisations and the local business chamber. To date, this approach has seen collaboration between the AMSA Task Team and over 30 organisations to respond to the challenges encountered in the region.

The Task Team consists of the following seven organisations:

1. Saldanha Bay Municipality;
2. WCG Department of Economic Development and Tourism;
3. WCG Department of Social Development;
4. WCG Department of Environmental Affairs and Development Planning;
5. WCG Department of Local Government;
6. Saldanha Bay Industrial Development Zone; and
7. Wesgro.

            A list of the 28 organisations that participates at various levels of intensity and at different points of activity with the Task Team, is as follows:

1. National Department of Trade and Industry;
2. National Department of Environmental Affairs;
3. Department of Employment and Labour;
4. Department of Home Affairs
5. WCG: Department of Health;
6. WCG: Department of Human Settlements;
7. WCG: Department of Cultural Affairs and Sport;
8. WCG: Department of Agriculture;
9. WCG: Department of Education;
10. WCG: Department of Transport and Public Works;
11. South African Social Security Agency;
12. National Youth Development Agency;
13. West Coast College;
14. Independent Communications Authority of South Africa;
15. Cape Access;
16. South African Revenue Services;
17. South African Human Rights Commission;
18. Small Enterprise Development Agency;
19. Small Enterprise Finance Agency;
20. Legal Aid;
21. Commission for Conciliation Mediation & Arbitration;
22. Western Cape Gambling & Racing Board;

23. Siyabonga Youth;
24. Media, Information and Communication Technologies Sector Education and Training Authority;
25. Culture, Art, Tourism, Hospitality, and Sport Sector Education and Training Authority;
26. West Coast Business Chamber;
27. Transnet, and
28. Working on Fire.

In addition, a DEDAT official, who has been based in Saldanha, pro-actively engages the business community to monitor for impact and better understand the eco-system to ensure that interventions are aligned to business’ needs.

Lastly, the WCG Department of Social Development (DSD) has offices in Vredenburg that regularly engage citizens on social matters and provide feedback to the AMSA task team to ensure that socio-economic responses are aligned to citizens’ needs. DSD has also ensured that the Saldanha Bay WOSA initiative has been apprised of the interventions by the AMSA initiative and will work with DEDAT over the next few months to harness this support mechanism for the Saldanha Bay community at large and consider institutionalisation of the approach.

(3)        What (a) are the current pitfalls of the process and (b) the strategies that the provincial government is implementing to mitigate these pitfalls?

The following pitfalls and/or risks have been identified and dealt with as follows:

1. COVID -19: in a stakeholder-driven initiative where travel restrictions are issued

A ‘whole of society’ approach has been applied to the process that requires constant relationship building with stakeholders to ensure that mutual objectives can be achieved.

In the current context of COVID19, stakeholder engagements cannot always take place as often as would be ideal, with the result that creative means of stakeholder relationship building and strengthening needs to occur. This is currently being achieved through electronic engagements where possible and will be further developed over the coming weeks.

It is worth noting that in response to COVID19: many ports are closed for entry of people, but the Port of Saldanha is not an official Port of Entry (i.e. no immigration services), so the closure for people entry has a minimal effect on Saldanha. Cargo movements are continuing as per normal. The Port of Saldanha primarily handles bulk exports of iron ore and manganese and bulk imports of crude oil. These ships (crude carriers and ore carriers) are typically at sea for two weeks before reaching Saldanha, which means that crews are effectively isolated for two weeks before arrival. Nonetheless, crews are not allowed to disembark in Saldanha and contact with crew members are restricted.

2. Interventions are short-term in nature and may lack sustainability and momentum

Many of the interventions are short term in nature, and there may be the risk that its sustainability (and therefore impact) may be limited.  However, overcoming this potential pitfall lies in the nature in the interventions that are implemented, which seek to:

1. Build Resilience and Self-Agency amongst the citizens and businesses; and
2. Boost Business confidence, which has a virtuous impact.

3. AMSA’s willingness to enable alternative uses of their plant or sale of their plant.

AMSA has been circumspect in selling its plant for a variety of reasons, including their hope that when the business cycle and market gains positive momentum, they may be able to reopen their plant.  The dti, with its AMSA-shareholding partner (the Industrial Development Corporation) has driven engagements with AMSA on this matter. The Task Team has provided the following to the nationally-based parties:

1. Alternative options for the use and business model of the plant;
2. Identification of potential non-competing investors/ buyers; and
3. Guidance on environmental matters arising.

4. Time taken to land investors, particularly given the severe domestic economic slow-down.

While a number of new investors into the region have been (and will be) secured by the SBIDZ, there is no guarantee that all of these investments will be concluded in the short term (1 year). The AMSA task team accordingly has taken steps, through Saldanha Bay IDZ and Wesgro, to identify potential new opportunities and have initiated business to business matchmaking to mitigate for this in the short term.  The Task Team has also

brought Transnet on board to assist in fast-tracking decision-making with respect to Port-related investment opportunities. 

5. Energy security

The lack of energy security poses risk to all investment facilitation and business retention in the area. In mitigation thereof, the Saldanha Bay Municipality and DEDAT continue to work with Eskom to find ways to reduce the negative impact of load-shedding on businesses specifically.

(4)        (a) What is the terms of reference of the task team, (b) what is the composition of the task team, including the (i) name and (ii) role of each member, and (c) what progress has been made to date with regard to activities of the task team, including but not limited to the support given to the (i) workers, (ii) community and (iii) SMMEs?

The Cape Catalyst Unit within the Department of Economic Development and Tourism acts as secretariat of the AMSA task team. Initially the Task team met every week with all stakeholders and was chaired by the Minister of Finance and Economic Opportunities (November 2019 – February 2020). Once the workplan was approved and gained traction, the Task Team established bi-weekly meetings, with the provisio that it meets more frequently if matters of urgency arise, The project team is currently chaired by the DEDAT DDG, Ms. Jo-Ann Johnston and provides regular updates to the Minister.

A focus area lead (supported by a team where necessary) has been appointed for each of the focus streams. The details of the focus areas and the champion appointed against each of the focus areas are detailed in the matrix below:

Achievements and activities that have taken place to date with respect to the various focus areas are as follows:

1. Support to the workers and response to social challenges:

A Career Resilience Outreach programme was hosted over the 20^th and 21^st of February 2020 with the objective of developing Career Resilience when facing unexpected job losses. A total of 1,271 citizens and businesses attended the programme, with 177 of these specifically being AMSA workers (representing 14% of the attendees). A total of 23 organisations were present at the programme offering support and services.  DSD identified 17 applications for food parcels by AMSA workers.

The Career Resilience days were well-received and preparations were underway for a second similar intervention on the 7th and 8th of May 2020. It should be noted that the announcement made by the President of the Republic of South Africa on 15 March 2020 with respect to COVID19 prevention measures will impact on the timing of the second event. New dates have not been yet determined.

The DSD local office in Vredenburg continues to provide assistance to the community between the events and has placed this matter on the WOSA-Saldanha agenda to activate support for a longer-term broader social- support programme. The Saldanha Bay WOSA (led by DoH and

includes DEDAT, DoLG, DSD and WCED) has been requested to identify where they can support the community in the long-term, given social ills that may arise due to the AMSA closure.

2. Support to SMMEs and businesses:

A SMME distress survey was undertaken to determine what the impact of AMSA’s closure is likely to be on businesses within the region, in particular those businesses associated with AMSA’s supply chain.  A total of 24 businesses were contacted, with 13 responding to the survey to date. On average, these companies relied on AMSA for 80% of their turnover.

The results are being further analysed while the team has successfully recruited SEDA to support companies requiring help. In this respect, three companies have already been assessed by SEDA, with a further three companies having made applications to the DEDAT Booster Fund for financial assistance. Additionally, SEDA is investigating the possibility of making a ‘turn-around’ specialist available to assist the businesses in distress. Other support measures are also solicited from partner organisations, e.g. sponsored mentorship by retired business experts.

3. Support for downstream industries.

One company was identified as being significantly impacted on by the AMSA closure. The project team has successfully facilitated a meeting between this company and the dti (13th of February 2020).  This has resulted in further discussion and negotiations with respect to the support that can be provided to the company to continue to operate and avoid retrenchments.

4. Communications:

The communications team has successfully delivered and implemented a communications plan and has facilitated the development of a career resilience booklet which was made available the Career Resilience Programme held on 20^th and 21^st of February 2020.

Additionally, numerous joint press statements have been released by DEDAT, Saldanha Bay Municipality and the SBIDZ specifically, to raise awareness of new investments concluded in Saldanha Bay and to create awareness around the support available to citizens and businesses. The team has also created a webpage on the WCG site that continues to provide information

on Career resilience to interested parties (even beyond Saldanha) and is in the process of developing a ‘Business Resilience’ booklet for distressed companies.

5. Mitigation of potential environmental impact:

The WCG Department of Environmental Affairs and Development Planning, and other authorities that have previously issued authorisations on the site, are embarking or have undertaken reviews of the authorisations issued in order to monitor the situation from a compliance perspective with respect to obligations being adhered to.

6. Investments:

There are currently at least 6 investment projects that are being tracked; and categorised according to their probability of success and timing of landing.

Thus far, three of these investment opportunities were negatively impacted on by decisions made by the Port. As a result of the Minister’s direct interactions with Transnet, this SOE agreed to support the SBIDZ’s efforts towards investment recruitment.

Furthermore, the SBIDZ announced its recruitment of R300 Million in investment over the last months, which will bring much needed relief for the unemployed and SMMEs in the area. The remaining investments continue to move towards realisation, with one investor entering the finalisation stage of securing financing and preparing for construction in the 3rd or 4th quarter of the 2020/21 financial year. Another investor is in negotiations with TNPA and aims to have resolution on the contractual agreement by April 2020.