Newcastle’s future following AMSA’s downsizing

When the news dropped at the end of November 2023 with ArcelorMittal South Africa (AMSA) announcing that it was downsizing its Newcastle Works, various concerns bubbled to the surface. Apart from an estimated 1 400 AMSA employees and 880 contractors losing their jobs in the coming months, how many businesses, related or not, would be impacted? Or better yet, how would the entire town deal with the impact of this asteroid smashing into Newcastle’s fragile economy?

Beyond the immediate workforce consequences, the downsizing of AMSA’s operations is poised to have a ripple effect on numerous local businesses and industries.

As AMSA commences the intricate process of winding down its operations, the full extent of the implications remains uncertain, with the unwinding set to conclude only in April 2024.

Therefore, to comprehend the scope of the damage or at least see what effects are already being felt, Newcastillian News conducted interviews with five local businesses, related and unrelated to AMSA.

Firstly, the historical roots of Newcastle and AMSA, date back to the 1970s. When AMSA (originally ISCOR) arrived it changed the economic landscape of the region. Numerous businesses opened to serve it and more businesses followed to serve the growing number of people making their way to Newcastle. With 50 years of being the bloodline of a town and now pulling back, there are rightfully some deep concerns about how the town will bounce back.

Looking at the situation as it now stands, Amajuba Mall’s Centre Manager Robbie Matthee expressed deep concern over the profound economic impact on businesses, schools, and the municipality. “It is going to impact businesses at the Amajuba Mall, as people will not have the spending money. Also, this is going to impact schools just as much as it will impact businesses, and even the Newcastle Municipality will be affected as how are people going to afford to make their payments on the monthly Municipal accounts.” He additionally added that AMSA’s announcement came at the wrong time of the year, as the festive season was a period when festive shopping boosted the local economy in various sectors.

He further stressed that the steel giant’s decision to start downsizing its operations could already be seen, as business was proving to be quiet following AMSA’s announcement.

“I do believe that there is a way forward for Newcastle though, but we will need a strong leadership that will have the community’s best interests at heart and strive for development,” said Matthee.

Adding to this, Newcastle Corner’s Centre Manager Isaac Thabede explained, “While I can’t say much about the matter, with the thousands of people now set to lose their jobs at AMSA, we at Newcastle Corner will be impacted in the sense that the community will not have the spending money it once did, and we could potentially see fewer customers.”

Speaking on when Newcastle will feel the full impact of AMSA’s decision, Thabede stressed the full ramifications will most likely come in January 2024. “At the moment, people still have budgeted for the month of December, and while people are conscious of what is happening, I think the community will only feel it from January when starting to plan for the year ahead and when residents get their children’s school supplies.”

The Pint’s Norbert Kade stressed that when looking at the job losses, one had to take the affected people’s families into consideration and for every one person that would be dismissed, you would have to add four people to compensate for the families.

“The impact of AMSA downsizing will have an impact on the economy and smaller businesses. However, our clientele is diverse and not as reliant on AMSA as it once was. But I can’t predict exactly how this will impact us. However, a lot of the youngsters who support us are varsity students and the question is, will these youngsters’ parents now be able to continue sending them to varsity and giving them spending money? “

However, Kade remains upbeat for Newcastle and states that while the news of AMSA’s decision is devastating, it is not the first time that the town has received bad news such as this. “We have gone through downsizing processes before when one remembers Karbochem and Lanxess, and Newcastle survived. Also, the infrastructure at AMSA can be restarted if it is bought over or if AMSA decides to restart. So, being the optimist, I believe that based on the company’s infrastructure, there will be a rescue mission or possible future investments,” elaborated Kade.

Furthermore, Newcastle Optometrist Davida van der Merwe added that it was sad that the end of an era had dawned on Newcastle with AMSA being part of the community for 50 years. “AMSA has contributed immensely to businesses and their sub-contractors, and this will have an impact on the local economy. As we had a few AMSA employees come to us for their eyecare, we will now have to find a way to adapt and improve,” said van der Merwe.

In addition to this, van der Merwe said that while there is going to be less spending money in the coming months, with the business sector having to evolve or face dire circumstances, she stressed that she agreed with Kade that this isn’t the first time Newcastle had faced an uncertain future.

“I am a believer in that there is still hope for Newcastle and the town will not fall flat. We will probably feel the full effect in six months to a year’s time, but not everyone is going to move away. This is a strong town and there have been similar company closures and layoffs in the past,” said van der Merwe, who pointed out that Newcastle faced the same uncertainty when Karbochem, Lanxess and Venco retrenched people.

Moreover, van der Merwe stressed that Newcastle businesses had to adapt to the changes and evolve, while community members had to rally together to push the town ahead.

While Davida van der Merwe and Norbert Kade were optimistic, local barber Atish Rajpaul from Rashpalls Barbers, stressed that if AMSA proceeded with its decision, it would impact several of its clients. “This process will not only impact the employees themselves but their children, which in turn impacts us. However, while people are trying to take steps to minimise the impact of AMSA’s decision, I believe that Newcastle will feel the full extent in July/August 2024.”

Rajpaul added that to avoid Newcastle becoming a ghost town, steps would have to be taken to attract further investments and large industries that match AMSA in size.

Africa Maintenance Equipment (AME) Amajuba’s Managing Director Donavan Govender added that AMSA’s decision was going to have a massive impact on Newcastle and AME as a business. “ArcelorMittal is one of AME’s biggest customers and their decision to downsize is going to impact us and the engineering sector, which supports AMSA in some form.”

Elaborating that AME Amajuba held unique stock specifically for AMSA Newcastle Works, the company would suffer immense stock losses which would now see AME having to come up with a solution to minimise the financial loss and ensure the stock not be written off.

In addition to this and when looking forward, Govender stressed that as hopeful as people wanted to be, he felt AMSA’s decision would have a detrimental impact on the community which could already be felt. “We have noted a lot of work and inquiries slowing down, and some orders being cancelled. Then there are the other companies in the engineering sector which are going to be impacted. This in turn will impact other businesses and families. With the current situation, we will have to look at other industries such as the coal mines that want to open in Newcastle. While many not want them in town, Newcastle needs their business,” emphasised Govender.

In addition to this, he believed the Newcastle Municipality would also need to improve local infrastructure if it wanted to save the town and ensure people continued paying their bills. “People won’t be able to pay their electricity bills and the Newcastle Municipality needs to get involved. The municipality is already struggling financially, what will happen to it if people can’t afford their bills,” he stressed.

Considering all of this, Govender also highlighted that the housing and rental sector would be impacted, as several families and businesses would have to move and sell up. “AMSA supports a lot families, if the town doesn’t pull together, we will be in trouble and there will be a decline in spending at places such as restaurants, bars and more spending allocated on essentials only.”

Moreover, if the necessary steps to tackle the problem of mass job losses and a decline are not taken now, Govender said the knock-on effect in Newcastle would be immense, impacting thousands more families, several businesses and the very town itself.

In conclusion, the unfolding situation in Newcastle raises significant concerns about the town’s economic future. The comments from local businesses underscore the urgent need for a strategic response to prevent a cascade of negative consequences. However, as seen before, the town has a reputation for bouncing back and hopefully through a change in the local mindset and investments, we can once again usher in a new era for Newcastle.

The community is invited to share their views and insights on the matter in the comment section below.