Arcelormittal: Counting the cost of Transnet, Eskom dysfunction

Arcelormittal, one of the leading steel companies in South Africa, faced significant market volatility recently following the announcement of potential job cuts. The company's CEO, Kobus Vesta, sat down for an exclusive interview with CNBC Africa to discuss the challenges and decisions that led to this point. The market reacted sharply to the news of the job cuts, with Arcelormittal's stock price plummeting by 20 percent initially. However, the share price has shown signs of recovery, indicating that the market may be reassessing the situation. During the interview, Vesta shed light on the factors influencing the decision to consider cutting 3,500 jobs. He highlighted the importance of assessing the company's future prospects, with a focus on replacing imports to drive growth. Vesta emphasized that the current economic conditions do not present favorable conditions for significant expansion, prompting the need for strategic decisions regarding workforce optimization. Vesta also addressed the external challenges affecting the steel industry in South Africa, pointing out issues such as overcapacity, scrap metal regulations, and the operational challenges faced by entities like Transnet and Eskom. These structural issues have contributed to a complex operating environment, prompting Arcelormittal to make tough decisions to ensure long-term sustainability. The impact of losing steel-making capacity in a country like South Africa is profound, according to Vesta. Not only does it result in a decline in value-added manufacturing, but it also hampers the overall industrial output and GDP contribution. Vesta illustrated this point by referencing the decline in manufacturing's share of GDP from 25% to 12%, highlighting the broader implications of a weakened steel sector. Vesta's insights extended to providing recommendations for government intervention to support the industry and foster economic growth. He emphasized the need for enabling policies that facilitate competitiveness and address key challenges like infrastructure deficiencies and input cost disparities. Additionally, Vesta stressed the importance of private sector involvement in resolving critical issues like transportation and pricing mechanisms. In closing, Vesta expressed hope that policymakers would heed his advice and take proactive steps to address the underlying problems plaguing the industry. As Arcelormittal navigates through this challenging period, the CEO's strategic vision and clarity on the path forward will be crucial in shaping the company's trajectory.