Six-month scrap metal ban to combat cable and metal theft proposed by the government

The Department of Trade, Industry and Competition (DTIC) has gazetted its draft policy proposals to regulate and restrict the trade of scrap metal in South Africa for public comment.

The draft policy changes are a direct outcome of president Ramaphosa’s 2022 State of the Nation Address, where he promised to tackle growing instances of criminality in the scrap metal value chain, particularly with copper theft and other metals stolen from public infrastructure.

Theft of copper and other metals hit South Africa’s infrastructure hard, leading to extended power disruptions in neighbourhoods and industry, and even toppling entire railway systems for months on end.

Ramaphosa said in his SONA that: “The damage caused by the theft of scrap metal and cable on our infrastructure like electricity, trains and other vital services is enormous. We will take decisive steps this year both through improved law enforcement and by considering further measures to address the sale or export of such scrap metal.”

According to the DTIC, citing research from the Trade and Industrial Policy Strategies and Genesis Analytics, copper theft from the country’s rail network and electricity grids carries an annual economic cost exceeding R45 billion in 2020/2021.

“The costs arising from the theft of steel and other metals are also serious. By way of illustration, the damage from stolen steel lattices alone was R100 million in 2020/2021. As with cable theft, the destruction of pylons and other supports for transmission can lead to widespread loss of electricity,” it said.

The department said that stolen copper, steel and other metals go through several processes and are mainly exported across borders as scrap metal. Scrap metal is a legitimate trade in the country, making it difficult to track the illegal trade and exports.

Criminals are able to easily conduct their black market businesses because it’s cheap to import furnaces to transform the metals, and there is no formal permit or registered trader regime in place to identify the legitimate sellers from the dodgy ones.

The department proposes a host of policy measures to put a stop to this. The other components of the proposed first phase of the intervention include: Expanding the definition of waste and scrap metal to include other common types of metal that are exported; Developing a permit system for the export of these metal products; Temporarily suspending the price preference system (PPS) for scrap metal exports, with some exceptions; An export permit system for semi-finished metal products to facilitate easier policing; The creation of an import permit system for furnaces and various other scrap transformation machines; Creating a registration regime for scrap metal sellers with enhanced registration and strict reporting requirements; Restrictions on who can sell scrap metal and adding requirements that buyers only purchase from registered sellers; Beefing up border controls; Prohibiting the use of cash in scrap metal transactions and black listing offenders.

“The temporary prohibition on exports of waste and scrap metal and the creation of a permit system for the export of semi-finished metal is likely to lead to a material reduction in the theft of metal from the country’s infrastructure, including its energy and transport infrastructure, which will have significant benefits to the South African economy,” the department said.

“It is anticipated that the prohibition and permit system will achieve this aim by eliminating or reducing one of the avenues for monetising stolen metal i.e. its exportation.”

The department added that because these interventions will divert significant volumes of scrap metal in the local market, it will also lead to lower prices, which will likely disincentivise theft.

“These interventions will lead to a formalisation of the metal trading industry whereby only legally-compliant and transactionally transparent businesses will be able to legally trade in scrap and semi-finished metal products.”

“This will in turn enable closer monitoring of the physical movement of these products, and more targeted enforcement activities, thereby significantly increasing the risks of dealing in stolen goods,” it said.

Metal recyclers say proposed metal export ban will negatively impact price of scrap metal
It has been reported, which would be unusual if it was not, that the Metal Recyclers’ Association of South Africa (MRA) says the six-month ban on the export of metal proposed by the Department of Trade, Industry and Competition (DTIC), would detrimentally affect the price of all South African scrap metal, and, in turn, negatively impact the recycling sector and all sources of scrap generation, including manufacturing, construction and mining, as well as the informal sector.

In their own short statement the MRA says it applauds Minister Patel’s response to addressing the current infrastructure theft situation, as per the various gazette notices issued on Friday 05 August 2022. However, we note some obvious concerns that will negatively affect the country’s entire bona fide metal recycling sector and indeed, also all parties engaged in selling scrap metal. These points will be addressed to the DTIC within the prescribed 21-day period.

MRA and The Reclamation Group spat
It has also been noted that the MRA are in a spat with Mr Harry Kassel and The Reclamation Group over an email the MRA sent out to its members insinuating that Mr H Kassel was promoting a ban on the export of scrap metal while addressing delegates at the recent SEIFSA conference held in May 2022. See The Reclamation Group’s communication to the MRA referring to the MRA’s continued personal attacks on the company and the MRA’s vendetta against its CEO, Mr Harry Kassel. See https://mra.co.za/wp-content/uploads/2022/05/SEIFSA-conference-Reclam-Group-defamation-notice-1.pdf.

The Reclamation Group correspondence said: “Notwithstanding the clear and indisputable facts, the MRA email is factually incorrect/inaccurate and the MRA has twisted and distorted the facts and misinformed its membership in an attempt to insinuate that Mr H Kassel was representing anything other than the views of the sub-committee.”

The Reclamation Group wanted the MRA to publish an unconditional retraction of the MRA email to the full MRA membership, failing which Mr H Kassel and The Reclamation Group shall take such action against the MRA and all of its executive members in their personal capacities as it/they, in the circumstances, considers appropriate. Nothing can be found about a retraction.

SAISI members support ban
Members of the South African Iron and Steel Institute (SAISI) have come out in full support of the proposed six-month ban on the export of scrap metal from South Africa.

SAISI members include ArcelorMittal South Africa, Cape Gate, Columbus Stainless, Force Steel, Scaw Metals, SA Steel Mills and Unica Iron and Steel, while Safal Steel and Grinding Media are affiliated members.