Saldanha Steel, an Apartheid-Era Conceived Mega-Project, Closes

(Bloomberg) -- The Saldanha Works steel plant has become South Africa’s first state-backed industrial mega-project conceived to counter sanctions during apartheid to close, as making a profit in the open economy overrides the case for strategic industries.

Like many planned projects it took years to progress and ended up opening after the country’s first all-race elections in 1994, lessening the initial need for its construction. South Africa’s transition to an economy integrated with the world was a slow process and state involvement in industry was significant even after apartheid ended.

ArcelorMittal’s South African unit today announced that the $1 billion plant, the planning of which began in the 1970s, will be closed. The 1.2 million-ton a year steel sheet mill has consistently lost money since it was opened as a joint venture between the formerly state-owned Iscor Ltd. and the government’s Industrial Development Corp. in 1998.

The project isn’t the only dud formed from partnerships between industry and a government that feared that sanctions would deprive the South African economy of everything from oil to steel. Anglo American Plc and BHP Group Plc, then known as BHP Billiton, partnered the IDC in Columbus Stainless, a steel mill that failed to make money and is now owned by Acerinox SA.

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Other projects that can trace their origins back to the fear of sanctions are the coal-to-fuel and chemicals plants owned by Sasol Ltd., a company controlled by the government until 1979, and Mossgas, a troubled gas-to-fuels plant on South Africa’s southern coast.

“The primary logic was self preservation,” said David Shapiro, the deputy chairman of Sasfin Securities, who has been trading stocks in South Africa since 1972. “They had to build the projects to keep the South African economy running.”

To contact the reporter on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Antony Sguazzin, Gordon Bell

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