The EU has objected to a proposal by the SA government to ban the export of scrap metal, saying such a drastic step potentially violates provisions that govern world trade.
The EU is SA’s largest trading partner and its biggest source of foreign direct investment, with more than 1,000 European companies active in SA.
Recent figures provided by international trade consulting firm XA show that between July 2021 and June 2022, SA shipped out about R6.5bn worth of scrap, with shipments to the EU accounting for R775m.
The EU requires a wide range of metals, in part to produce some of the technology needed to transition from fossil fuel to clean renewable energy.
In a draft trade policy directive published on August 5, which was open for public comment until last Friday, the department of trade, industry & competition proposed a phased approach to curb metal infrastructure theft, which is costing the economy an estimated R187bn a year.
As a start, it proposes that exports of ferrous and nonferrous waste and scrap metal of any kind listed in the schedule be banned for an initial period of six months from the date of publication of the final notice.
But, in a written submission to the department, the EU raised concern that an export ban could violate trade guidelines set out by the World Trade Organization (WTO).
It highlighted the WTO provisions allowing for export prohibitions or restrictions to be temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party. “But the conditions do not appear to be met by the notice [proposal to ban scrap exports] concerned,” the EU said.
The WTO guidelines to justify an export ban mainly include preventing or relieving critical shortages of products essential to the exporting nation.
“However, the EU is not aware of evidence of there being a critical shortage of the products affected by the ban ... there does not seem to have been a dramatic increase in the export of these products, which could have been a cause for a critical shortage. The EU has not seen other evidence of a critical shortage of the products affected by the ban. As the declared objective of the ban is to prevent theft, this would also not appear to be meeting the conditions of [WTO] rules,” the EU said.
“The EU is of the opinion that the trade distorting measure is potentially in contravention of WTO obligations. It may be suggested to put in place the regulatory framework necessary to control the trade and circulation of scrap and metals inside SA and, if necessary, examine the need to ban exports.”
Policy controls
The EU believes that until these policy controls are implemented in the SA market, stolen scrap and metals will continue to be sold domestically, possibly at lower prices due to oversupply resulting from the export ban. “This would ... create an unfair advantage for the domestic users in relation to those abroad.”
The EU pointed out that the list of products affected by the potential ban includes metals that do not appear to relate to scrap, including unwrought aluminium, zinc, tin and magnesium. “We would appreciate explanations for the inclusion of these materials ... and how they relate to the stated objective to limit trade of scrap metals due to increased incidences of unlawful trade,” it said.
Other critics of the proposed ban argue that the theft of infrastructure is a policing issue not a trade matter, and a prohibition in shipments could leave many legal waste pickers without an income. A reduction in prices would lead to more infrastructure damage as syndicates would need to steal more.
On Thursday, during a debate on the metal infrastructure theft crisis called for by the DA, trade, industry & competition minister Ebrahim Patel insisted that an export ban will be crucial for reducing demand and prices, which will curb theft. He said it was impractical to have 24-hour policing and physical security of each potential metal or copper cable site.
DA MP Mat Cuthbert said the proposed ban incorrectly diagnosed the problem and punished legitimate metal recyclers and waste pickers. He said scrap metal exports had already by and large been limited over the past five years through export tax and the price preference system, which prohibits the export of scrap metal unless it has first been offered to domestic consumers at a discount to the international price at the time of sale.
“A previous three-month ban in 2020 did little to prevent the theft and vandalism of public infrastructure and only ended up in job losses and economic hardship for those in the downstream steel industry,” he said.
“However, minister Patel denies this fact and is more interested in protecting special interests in the upstream steel oligarchs.”
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