The government is evaluating the effect of the recently introduced export tax on scrap metal amid concerns that the duty together with another regulation forcing recyclers to sell at a discount locally amounts to double tax.
There are also fears this could lead to reduced incomes and job losses in the metal recycling industry. The industry contributes about R15bn to SA’s economy and employs about 350,000 people, many of whom are involved in informal collection of scrap metal.
SA scrap metal annual exports are estimated to be up to 40% of the total collected stock. In 2019, SA shipped about 525,000 tonnes of scrap steel worth about R1.9bn.
The state considers scrap metal as a critical feedstock into manufacturing and crucial for SA’s industrialisation drive. As a result, the government introduced various measures to boost access to higher quality and more affordable metal waste in the local market.
In a reply to a question from the DA published in parliament at the weekend, finance minister Enoch Godongwana said the Treasury is engaging with the department of trade, industry & competition on the role and effect of the export tax on scrap metal while a price preference system is in place.
A price preference system was introduced in 2013, which disallowed the export of scrap metal unless it had first been offered to domestic consumers at a discount to the international price at the time of sale. The government’s long-term plan for the industry, however, has always been to introduce an export tax on scrap metal to replace the price preference system. It says such a tax will be the most effective tool to reduce the domestic price.
But trade, industry & competition minister Ebrahim Patel recently announced that the price preference system would be extended by two years. This came a few weeks before the export tax came into effect on August 1, meaning that scrap metal exporters must now sell at a discount locally and at a cut rate when they export.
DA MP and finance spokesperson Geordin Hill-Lewis had asked Godongwana whether the Treasury is considering suspending the new export tax so exporters will not face the burden of both the tax and the regulation to prioritise domestic consumers of scrap metals.
In his reply, Godongwana said further consultations will take place with stakeholders, such as scrap metal suppliers and users, signalling possible changes to the measures meant to boost local supply of metal waste.
The department of trade, industry & competition was yet to respond to a request for comment on Monday.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa), which represents 22 employer associations in the broad metals and engineering sector, 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.
Hill-Lewis told Business Day on Monday that the implementation of the tax and the extension of the price preference system is deeply frustrating and destructive for scrap metal exporters.
“They were duped. I get the sense that even Treasury was duped. They all thought it would be one or the other [export tax or the price preference system], but not both. Now they are hit with a double whammy,” Hill-Lewis said.
Donald MacKay, the founder and director at XA International Trade Advisors, said the export tax together with the price preference system could cost scrap metal exporters at least R300m a year and this could mean less money for waste pickers and potentially lead to job losses.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.