Mittal Steel is blamed for "high" domestic steel prices, but the problem was created by government when it built Iscor using taxpayers' money in the 1980s (Cover Story September 7). Two-tier pricing has existed on steel ever since.
In 1987, before the privatisation of Iscor, the domestic cost of wire rod was 60% higher than the export price and 25% higher than the domestic price in Germany and the UK. There were four regional producers, if Zisco in Zimbabwe is included. It was not about super-dominance, import parity pricing or monopoly pricing. Surplus capacity was "dumped" into export markets at best price including transport and other costs. At least it kept plants busy and people employed while earning foreign exchange. Steel plants have to be operated at full capacity.
Today the export and domestic prices of wire rod are about the same because of high world demand. Domestic prices are in line with Europe. Mittal has been penalised 5,5% of its 2003 turnover the year the Industrial Development Corp was selling its "controlling" stake to Mittal. At least Mittal is doing a better job in providing SA with cheaper steel than government did - and paying more taxes.
Is the "get Mittal" campaign simply wrath at "giving away" Iscor for a pittance? Or is it about "excessive profits"? Why did the Competition Tribunal allow the sale of a national strategic asset to a foreign steel maker, breaking a government undertaking made at the time Iscor was privatised? Whether Mittal sold its steel internationally or through a half-owned company is rather academic. Would vertical integration legitimise two-tier pricing?
Ironically, "nondiscrimination" laws on pricing could affect SA's ability to compete. It would force vertical integration and keep out new entrants. Not only would it curb production capacity on steel but it would destroy industries like the motor industry, propped up by 30% tariffs and two-tier pricing. The world is a lot less perfect than our idealists would like. Whether the competition authorities are making SA more attractive and competitive is like competition law itself - a matter of opinion. Competition law is one of our fastest-growing industries.
