Scrap metal ban is not working and should not be extended – SEIFSA

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The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) has noted with concern submissions to the Department of Trade, Industry and Competition (the dtic) calling for the extension to the scrap metal export ban, designed to curb infrastructure theft, which is scheduled to come to an end this December.

A week ago, the dtic published a request for comments from interested parties on key aspects of the Scrap Metals Policy. These aspects include the proposal to extend the temporary prohibition of the export of certain ferrous and non-ferrous waste and scrap metal; the extension of the temporary suspension of the Price Preference System insofar as it relates to certain ferrous and non-ferrous waste and scrap Metal; a further restriction on the export of copper semi-finished products, and temporary prohibition of the export of used or second hand rails and subject rails to Export Control.

“SEIFSA’s position has always been that the scrap metal export ban is misguided in the issue that it is attempting to solve for, namely infrastructure damage for scrap metal theft. It is an extremely blunt measure with unintended industrial policy consequences. More worryingly it communicates a very poor economic signal by not taking into account a total steel perspective” Elias Monage, SEIFSA President stated.

“In the deliberations regarding the scrap metal export ban SEIFSA is beginning to note with some concern a shifting in the goal posts, where discussion are beginning to lean to the export ban being used as an industrial policy instrument to support scrap-based mills and the country’s decarbonisation efforts, which was never the original motivation for the ban,” it said.

“The initial intention was always security related aspects and to attempt to limit the damage to infrastructure, with other considerations – whether noble or adverse – being ancillary to the core issue,” said Monage.

SEIFSA believes the export ban is the incorrect instrument to solve a security related matter. The scrap metal export ban also presents World Trade Organisation (WTO) contraventions and anti-competitive behaviour from a predatory pricing point of view, it added.

“The critical question that still remains is whether the unsuccessful ban on ferrous scrap exports and suspension of the Price Preference System (PPS) has contributed in any meaningful way to the fulfilment of the objective of the directive – the elimination and/or reduction of metal theft and associated criminal activity. The undeniable answer to this question is that it has not,” SEIFSA said, urging the dtic not to extend the scrap metal export ban beyond December 2023.

The SA Government instituted a December 2022 to end May 2023 ban on scrap metal exports under a trial period to help reduce the theft of copper and ferrous metals, but as results were not satisfactory, this has been extended by another six months, according to a notice in the Government Gazette published on 15 June.

The initial six month trial seems to have had little hindrance to the ever-expanding illicit copper economy damaging electrical and other infrastructure. This is being driven in part by the rocketing copper prices reflecting high international demand for the metal.

The ban on exporting copper scrap – officially a six-month experimental period – only hurt the legal copper industry without preventing illicit exports or money laundering of illegal red metal proceeds inside South Africa or abroad, said Evert Swanepoel, non-executive Chairman of the South African based Copper Development Association Africa (CDAA).

However, the trial ban did include halting the import of smelting furnaces used extensively by both legal scrap metal dealers and red metal crime syndicates to smelt copper, but did not extend to those already in South Africa before the cut-off date, said Swanepoel.

According to the Department of Trade, Industry and Competition, copper theft from South Africa’s rail network and electricity grids carries an annual economic cost exceeding R45 billion.