The scrap metals industry, which contributes R15bn to SA’s economy, is set to receive a boost with the government considering measures to support the struggling sector, including a temporary ban on new exports of metal waste.
The industry employs about 350,000 people, many of whom are involved in informal collection of scrap metal. It has been hard hit by downturn in economic activity as a result of the Covid-19 crisis, and has requested government intervention.
Many countries impose duties to prevent the export of scrap metals such as copper, brass, lead, aluminium and zinc, a valuable economic resource that is used to produce a range of manufactured goods.
A clampdown on exports is in line with the government’s policy of promoting local beneficiation and stimulating the manufacturing sector.
SA scrap-metal exports are estimated at about 1.5-million tonnes annually, or about 40% of the total collected stock.
At the weekend, trade & industry minister Ebrahim Patel issued a trade policy directive to the International Trade Administration Commission of SA (Itac) to urgently look into measures to help support the metals industry. Itac is the organisation tasked with customs tariff investigations, trade remedies, and import and export control.
“Scrap metal is an essential material for the domestic processing industry, which itself is crucial for the South African manufacturing industry and for infrastructure development,” Patel said.
The downturn in global manufacturing resulting from Covid-19, has led to the amount of scrap metal available locally and internationally being dramatically reduced and, as a result, prices have increased sharply.
“Due to the steep global increase in prices and reduced economic activity, the industry has called on the government to urgently assist it. I have therefore issued a trade policy directive to Itac to urgently investigate the market conditions around the demand-supply imbalance in the scrap metal industry as a result of Covid,” Patel said.
The objective of the investigation is to determine appropriate amendments to the price preference system guidelines which can address the shortage in affordable good quality scrap metal, he said.
No ferrous and non-ferrous waste and scrap of any type may be exported for a period of the investigation unless Itac determines that it will not be used by the domestic processing industry. This will not affect existing export permits or applications made before the date of the notice in the government gazette. Itac has been directed to complete its investigation within two months.
In 2013, a price preference system administered by Itac was introduced, regulating the export of ferrous and non-ferrous scrap by not allowing the exporting of scrap metal unless it has first been offered to domestic consumers at a discount to the international price at the time of sale.
Patel said the long-term plan for the industry, which was announced by the minister of finance during his budget speech in 2019, and which is widely agreed upon within the sector, is to introduce an export tax on scrap metal as soon as possible.
“Whatever measures we take now are temporary to deal with this immediate challenge created by the Covid-19 pandemic, but they also lay the basis for the new steel industry master plan,” the minister said.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa), which represents 22 employer associations in the broad metals and engineering sector, welcomed the new interventions.
“We have previously stated our support for the principle of the non-export of scrap metal and are heartened by the government’s decision to support the industry during this difficult time of the pandemic, even as we await a longer-term solution to protect the industry through possible taxes on scrap metal exports,” said Seifsa CEO Kaizer Nyatsumba.
Seifsa has in the past supported an export tax on scrap metal due to challenges in the metal industry, including price increases for all main inputs in the sector and reduction of volumes of scrap as a result of the increased cost of overheads in the recycling sector, he said.
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