Local legal and compliant manufacturers cannot compete and some are closing shop, with all the attendant job losses.

“Illicit alcohol, tobacco, pharmaceuticals and gold have hit the headlines in recent years. Illicit steel has not, yet it is a pervasive phenomenon in the market that needs to be addressed urgently,” writes Charles Dednam, the secretary general of the South African Iron and Steel Institute.

“Unlike fast-moving consumer goods, steel has little retail visibility. This remarkable metal is generally regarded as a commodity rather than a finished product and little public attention is therefore paid to its price, quality or origins. Yet all three of these factors are critical for the end user and require far closer examination.”

“Steel’s consumer agnosticism is also derived from its lack of brand identity. Price and reliability of supply are major considerations for many end users, rather than brand assurance and quality. This approach, together with a raft of policy, legislative and enforcement weaknesses, has left the door wide open for the importation of a flood of illicit steel of varying quality, all of which is destroying legal and compliant local producers.”

“What is meant by illicit steel, how is it identified, where is its source, what is its impact and what can be done to stop it? While the likelihood of illicit steel being of lower quality than legal and compliant steel exists, this is not always the case. Indeed, a number of steel quality testing facilities operate locally to help ensure quality control. Apart from cost, there is no reason to make use of sub-quality steel. Notably though, lower quality illicit steel carries a raft of durability, endurance, corrosion, reliability, failure and legal liability consequences.”

Casting steel in Baotou, China

“Far more pervasive is the phenomenon of import abuse and manipulation by the illicit steel industry – and it is on an industrial scale. SA Revenue Service (Sars) customs and excise figures indicate that tonnes of steel product (such as steel wire, roofing and cladding material and steel tube) are landing on our shores from Asia at prices that are below the cost of the raw material in SA (even lower than the preferential price indicated by the International Trade Administration Commission, which is 30% below the world price for scrap).”

“This can be interpreted in two ways. Either the values declared on the import documentation are false and simply too low (in other words, fraudulent) or the declared value is accurate and correct, in which case the product is being dumped in terms of the World Trade Organisation definition. Deliberately misleading descriptions and categorisation of product is another form of circumvention. Thus, duties are undercharged and the fiscus and Treasury lose out.”

“Tariff codes are only effective if applied honestly and ethically by all. Evidence suggests this is not the case for tonnes of steel products imported into SA. How does this happen in practice? Research suggests that when local and global demand for steel drops precipitously and a major Asian exporting country continues to manufacture at high volumes at a loss, it is relatively easy for a company to be set up that buys locally produced loss-making steel from the Asian mill, and you are sure to make a healthy profit for yourself by exporting this product at a loss to SA.”

“Under this sharp practice, all paperwork is legal as it reflects the actual price paid/payable on a valid import invoice. The immediate consequence is that duties are undercharged or avoided altogether, with a direct loss to the fiscus.”

“An even worse example is when an SA company registers a company in China, for instance, buys the required product through this newly registered company at a relatively low price, and then exports it to SA, invoicing only a portion of the purchasing price. These export prices translate to ridiculously low final product prices, in some instances R1 600.00/ton, leaving the bulk of the purchase price untaxed.”

“Remarkably, the purchasers of this artificially cheap imported steel are not only local merchants and illicit operators, but could also include the public sector and state-owned enterprises that include stage consignments, where the steel requirements of complete projects are imported. This gives the lie to the much-vaunted re-industrialisation, localisation and designation narratives the government recently committed to.”

“The stark truth is that the illicit trade in steel is so pervasive that local legal and compliant manufacturers cannot compete, are struggling to survive and in many cases are closing shop, with all the attendant job losses.”

“The corrosive phenomenon of illicit steel is further facilitated by a number of broader structural failures highlighted in the recently released Transnational Alliance to Combat Illicit Trade (Tracit) report. The 2025 report notes that whereas efficient trade, customs and border management are crucial for curbing illicit trade, SA faces significant vulnerabilities, including declining efficiency at major container ports and severe understaffing and funding shortages within the Border Management Authority (BMA).”

“Of direct relevance for illicit steel, the report goes on to note that limited resources and overstretched enforcement capacities make it difficult to monitor and secure entry points effectively, allowing counterfeit products to flow into the country unchecked.”

“Tracit notes that illicit traders in SA regularly exploit vulnerabilities throughout supply chain networks to facilitate illegal commerce. These supply chains vary significantly – from maritime shipping routes to free trade zones. Rapid shifts in global trade dynamics and technological advancements increasingly challenge government authorities, demanding continuous modernisation of controls and resource allocation to address illicit trade effectively.”

“While illicit steel is a wide-ranging phenomenon, one decisive measure that can be adopted with relative ease is for the implementation of a formula tariff for imported steel products. A minimum price must be set for identified steel products under which people cannot import without paying the correct price, ad valorem duty and all applicable taxes. This constitutes today’s low hanging fruit.”

“The 2025/26 national budget allocated an additional R7.5 billion to Sars over the medium term to strengthen its investigative, enforcement and collection capabilities. Tackling SA’s illicit steel sector effectively would yield a meaningful return on this investment.”