for declining and distressed industries
such as the South African steel industry
FEATURED PAPER
By Andretta Tsebe, PhD
and
Prof. Dawid de Villiers and Prof. Johan Strydom
Cranefield College, South Africa.
- Abstract
When an industry goes into a crisis, the first question that is asked is what causes the crisis, followed by a question of what can be done to save the industry from collapse. This study aims to assess the impact of turnaround interventions used in the distressed South African steel industry. The study demonstrates that business rescue strategies are key enablers for turning around the steel industry from the grips of bankruptcy and transcend towards recovery. Through the lens of the steel industry, the impact of turnaround interventions was assessed by employing an exploratory quantitative research method.
Data from steel companies, business rescue practitioners, and labour unions that are active in the industry, were utilised using a 6-point bipolar rating scale questionnaire. Descriptive and inferential statistical analysis were used to test the study’s hypothesis. The statistical results showed a varied degree of association between the different turnaround interventions, which will have policy implications.
- Introduction
With demise of the feudal socio-political dispensation in Britain and Western Europe and the the emergence of industrialisation, the general populace emerged fromn their serfdom and inexorably became involved in economic activity by means of which to assure their own sustenance and to accumulate wealth. The importance of paid work as a means of economic survival and wealth creation during this time is emphasised by Heitger (2003) when discussing ‘classical’ economic theory, proposed originally by Adam Smith in his well-known book entitled ‘The Wealth of Nations’ (1776). Later economic development theorists such as John Mills who published the watershed book entitled ‘Principles of Political Economy’ in 1848, cited by Jensen (2017:2), suggested that the corollary of the importance of work for the individual, is the optimum utilisation of resources, including that of labour, as the fundamental driver of economic growth and development in any country. The later development of the so called ‘mainline theories’ of economic development focussed rather on the changing economic environment resulting from the impact of forces such as globalisation, developments in inter alia the transport and communications technologies and in more recent time data processing technologies, as the determinant of economic development and growth
A more recent view, expressed by inter alia Rustomjee (1993:3), is that one of the enduring axioms of international economic development, is that primary industries are understood to be initiators and drivers of economic development and growth because, (a) they inevitably demand the emergence of so-called ‘downstream industries’, as well as secondary and tertiary industries that support the optimum performance of their core business and (b) they promote job creation for themselves as well as for the support industries mentioned above, thereby promoting access to employment opportunities for individuals that promotes economic development in the wider community where they live, and by extension also wealth creation for individuals and the society as a whole.
Concomitantly, it is axiomatic that primary industries inevitably require the development of relevant infrastructure with regard to transport and the supply of power and water, that will support their business activities. According to Azolibe and Okonkwo (2020:2) this infrastructure inevitably has to be developed by the governments of the countries where these primary industries are located, as it is seldom viable for the private sector to do so. It is obvious that by stimulating the development of said infrastructure, the primary industry is further promoting economic development and growth in general, as well as job and wealth creation.
The converse of the premise stated above is the theoretical proposition that the socio-economic consequences of the decline or distress of any primary industry are almost never means limited to that industry only, or even to the ‘downstream’, secondary or tersiary industries related to it, but extent unequivocally even to individual people in the socio-economic environment in which the said industry exists or existed. These soci-economic consequences usually impact even those not directly related to or those dependent on it. This proposition is corroborated by the impact that the distress or decline of business organizations in the iron and steel industry had on the economies of the towns in countries such as the United States of America and the United Kingdom where primary industries went into decline or ended in distress, where primary industries went into decline or ended in distress, and the economic consequences for the people in the local communities of these towns in which these businesses and industries operated.
Equally, the severe negative socio-economic impact of the ailing iron and steel industry in South Africa experienced when Arcelor Mittal closed the Vanderbijlpark mini-steel mill in 2012 and the Vereeniging mini-mill in 2015 when, according to Dondofema, Matope, and Akdogan (2017) 400 employees were retrenched, lost their regular income and were left financially destitute. Equally, Wood and Mashiane (2018) detail the socio-economic impact of the closure of the Cape Town Iron and Steel Works Company in 2010, when 300 employees were retrenched, with the same dire consequences for individual people. Analysts have suggested that these job losses could have been avoided and the consequential negative socio-econmic imoact obviated, if the local steel industry companies could have been turned around and rehabilitated to the extent of again being viable, sustainable and globally competitive. Concomitantly, a Solidariteit (2015:4) report states that “…two-thirds of the households in Vanderbijlpark and Newcastle and one-quarter of those in Saldanha are dependent on the local steel industry for their livelihood. If the steel plants were to close, 66% of the labour force in Vanderbijlpark and Newcastle, and 25% of the labour force in Saldanha would become unemployed…”.
Despite the negative socio-economic consequences of the decline and distress of a large number of steel companies that were widely reported in the media and academic journals, as well as the ostensible ineffectiveness of the business rescue strategies employed in the steel industry in South Africa to date, little research has been done regarding their impact on the steel industry as a whole or the impact on downstream, secondary industries.
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How to cite this paper: Tsebe, A., de Villiers, D., Strydom, J. (2021). An evaluation of the relative effectiveness of business rescue strategies for declining and distressed industries such as the South African steel industry; PM World Journal, Vol. X, Issue VII, July. Available online at https://pmworldlibrary.net/wp-content/uploads/2021/07/pmwj107-Jul2021-Tsebe-et-al-evaluation-of-business-rescue-strategies-or-declining-industries1.pdf
About the Authors
Andretta Tsebe, PhD
Pretoria, South Africa
Since 2013, Dr Andretta Tsebe has been Director: Energy at the Department of Public Enterprises, Republic of South Africa, where she manages and mentors a team of professionals that provide technical support and research documents to the department’s executive management. She is also responsible for negotiation of technical energy generation, transmission and distribution plans with government departments and public stakeholders. During 2011-2013, she served as Deputy Director: Energy for the same department, developing international electricity trading strategies for the SADC market, monitored and evaluated electricity grid operation and expansion projects, and monitored and evaluated energy sector environmental performance. During 2005-2011, she was a process engineer at Eskom Kriel and Koeberg Power Station where she developed used nuclear fuel management strategies, performed routine and inspection maintenance of power plant systems, and monitored and evaluated daily power plant performance.
Dr. Tsebe is skilled in business rescue operations, mixed research methods, Microsoft applications, strategy development and engineering management, among others. She holds a BTech Chemical Engineering from Pretoria Technikon (1999-2003) and a Master’s degree in International Business Administration from Monash University (2014-2016. She recently completed her PhD in Commerce (Economics) at Cranefield College in South Africa (2017-2021). Dr. Tsebe can be contacted at Andretta.tsebe@dpe.gov.za.
Prof. Johan Strydom
Cranefield College
South Africa
Prof Johan Strydom has a DCom degree in Business Management from the University of South Africa. He has 45 years’ experience as a Business Management lecturer at North West University, University of South Africa and at Cranefield College. He has supervised Masters and Doctoral students for more than 30 years and produced a number of research outputs, including articles published in national and international peer-reviewed journals, as single author, with colleagues and post-graduate students. He has authored and contributed to many academic books in the field of Business Management and is currently the editor of five academic textbooks. He reviews papers for national and international journals and acts as external examiner for masters and doctoral dissertations/theses for all the major universities in South Africa.
Prof. Dawid de Villiers, PhD
Cranefield College
South Africa
Prof Dawid de Villiers holds a B.A. from Rhodes University (1965), B.A. (Hons) Psychology from the University of South Africa (1966), M.A. Clinical Psychology from Rhodes University (1969), M.A. Industrial Psychology from the University of South Africa (1969), D. Litt et PHIL from the University of South Africa (1978), Advanced Labour Law Diploma from the University of South Africa (1982) and PhD from the University of Pretoria (2000). He holds Primary Teachers Certificates from Graaff Reinet Teachers College and Rhodes University. Over the years he completed various executive and management training programs including a Management Development Programme at Polytechnic, London, UK (1976); Labour Relations Management Programme at the MDOR Institute at the University of California Santa Monica, USA (1980); Advanced Management Program, University of California Los Angeles, USA (1983); and Strategic Negotiations Program at the Institute for Personnel Management, Nieremburg, Germany (1986). He has been an advisor to many institutions and organizations, an academic advisor for universities across South Africa, and a supervisor of graduate students.
