DATE: 10 June 2004
Johannesburg
NUMSA PRESS RELEASE – FOR IMMEDIATE RELEASE
COMPETITIONS TRIBUNAL RULING ON MERGER REGRETTABLE AND A SERIOUS MISTAKE.
Once again the Competition Tribunal has erred to approve unconditionally for LNM holdings to increase its shareholding capital at ISCOR above fifty percent. It is regrettable that the Competitions Tribunal is defying its mandate to look after the interest of all stakeholders. We think that monopolisation is being entrenched by an organisation build to dismantle it.
Recently, the Competition commission approved Import Parity Pricing (IPP) charged by ISCOR. It is our firm view that the commission and the Tribunal have an insipid understanding of industry issues and subsequently making a comedy of errors that have serious ramifications to workers and the economy. The National Union of Metalworkers of South Africa (NUMSA) wants to highlight the tribunal disingenuous approach to the decision to merge ISCOR with LNM.
The Competition Tribunal seems to be sustaining the status quo and not helping us in the developmental project. The tribunal has deliberately undermined the fact that ISCOR steel division is to retrench 1000 workers in its attempt to pave way for LNM takeover. The two companies have been directly involved in the trimming of over 10 000 workers in the past five years. The Competition Tribunal argument that the retrenchments are not connected to the merger is untrue. This is not a merger where a new company is coming in to ISCOR. LNM Holdings are already the major shareholder and are already responsible for the retrenchments. The only difference now is that they will have a completely free hand to do what they want with workers and restructure the company as they wish. The timing of the proposed cut in employment is bad because employment, within the reasonable economic bounds, has to be South Africa’s priority.
As part of the acquisition, local human resources will be compromised. This means that foreign expatriates will be preferred to run the company based on the strategic plans with fixed mandate. Sadly, procurement will be externalised forcing the primary company to use cheaper inputs in the production process. This will further undermine the local content and destroy companies in the downstream industries. There will be too much emphasis on export growth, at the expense of the domestic market. The takeover will not achieve a balance between the needs of the upstream producers as well as strategic role in the industry and the employment creation potential of downstream sectors.
The tribunal failed to understand a simple economic logic that the takeover will lead to intra-firm pricing of steel, whereby the company will set and determine their own prices because they will own the product and services in the market. There will be more centralisation and monopoly thus undermining the national interest of South Africa. We believe that the takeover is erroneous because it does not create new employment. The acquisition further undermines the government in its attempts to create jobs and new investments in the country. The merger is not new investments. All what they want to achieve is to make a killing on profits. In this regard, the takeover will harm the broader economy of South Africa.
Further more, the recent rationale by the commission to approve import parity pricing charged by ISCOR are not just repulsive but borders on short-sighted perspective. As a result of import parity pricing ISCOR is charging double the price of steel to the local companies and consequently stifles the local economy and destroys jobs in the entire metal and mining industry industries. The IPP prevents the entry of the new companies in the downstream sector of the engineering, thus preventing the creation of new jobs in the local economy.
As a result the South African gas cylinder, barbeque manufacturer, Cadac, has closed all its operation in South Africa alleging that ISCOR has harmed its business by excessive steel pricing. The gold mining companies Durban Roodepoort Deep (DRD) and Harmony made similar complains to the Competition Commission. There is danger that this could have a negative impact on the economic growth as many companies are dismissing workers to catch up with ISCOR pricing mechanism. Applying IPP to get monopoly pricing is destroying jobs and local companies.
In conclusion, the intricacies of the merger and its impact on the economy cannot be resolved through manipulation of the facts and political chicanery but through mature leadership and the ability of Tribunal to consider other long term commitments to jobs. It is not fair to expect workers, most of whom are poor and many of whom are trapped in dire poverty, to take the burden of the acquisitions.
We want to advise the Competitions Tribunal that policy development and growth of the economy is much more about price competitiveness. It is not about emulating companies that are successful. It is about a process where the actors constantly searches and learns how to build and restructure its economy in a way that works for the entire society. The problem in South Africa why we do not achieve acceptable economic growth rates is that those assumed to be incapable of contributing positively are discarded and marginalized. This results in the country opting for wrong policy decisions.
For more information contact Dumisa Ntuli @ 689-1700 or cell 0829737282