Waste pickers, who are the backbone of the recycling industry, will be hit the hardest by the government’s six-month ban on the export of scrap metal.
The ban is part of a multipronged strategy to curb the theft of metal infrastructure that threatens to cripple the economy.
The ban, which has been opposed by a number of stakeholders including the EU, will leave many legal waste pickers without an income as scrap metal prices drop due to an increase in local supply.
The recycling industry, which is worth about R25bn, is crucial for mitigating the climate crisis.
Critics also argue that the ban is likely to be futile as criminal syndicates can easily avoid detection, and even if shipments become impossible they will steal more to boost their bottom line, which could mean more infrastructure damage.
Trade, industry & competition minister Ebrahim Patel said during a news conference in parliament that the ban would kick in as soon as the measures are gazetted. These were gazetted on Wednesday afternoon.
“There are two basic strategies [to tackle metal infrastructure theft]: first, to reduce demand for stolen metal by limiting exports of certain products for a limited period, and using that period to finalise a further set of measures to better regulate trade in these products,” Patel said.
“The second one is a shift from seeking to police hundreds of thousands of locations, every metre of cable, every traffic light, instead of doing that the focus will be on the logistics and distribution networks, to disrupt the criminal syndicates.”
Earlier in November, the cabinet said it had approved the comprehensive package of measures to tackle the damage to public infrastructure and the economy through restricting trade in waste scrap and semi-processed metals.
It said Patel’s department would provide the finer details of the restrictions once the legal work had been completed.
This was after the publication of a contentious draft trade policy directive in August, and public consultations on the proposal by the department of trade, industry & competition to restrict the movement of scrap to curb metal infrastructure theft, which is costing the broader economy about R187bn a year.
At the same media briefing on Wednesday, police minister Bheki Cele said crime intelligence shows that most of the stolen metal is exported amid a surge in global demand.
During the public consultation phase, the EU opposed an export ban, 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 from July 2021 to 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.
The World Trade Organization (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,” the EU said in its submission.
The government recently said SA was within its rights to take steps to curb damage to public infrastructure, and it was operating entirely within the WTO framework.
DA MP Mathew Cuthbert said: “Even though there are those who illegally benefit from recycling and trading with such metals, a significant proportion of traders in the industry do abide by the law and conduct legitimate business dealings. These traders will bear the brunt of government’s onerous overreach, not the special interest groups in the upstream steel industry.”
Cuthbert said the situation reveals the government’s inability to capacitate law enforcement authorities to combat illegal activities.
“In fact, the department is silent on how an already overstretched police force will be bolstered to enforce the newly introduced regulations, especially when they have shown themselves unable to do so hitherto,” Cuthbert said.
Patel said while there are legitimate traders, “at the same time the theft of public infrastructure was so debilitating, so expensive to the economy and that needed to be limited immediately”.
Research commissioned by the government found the most effective way to deal with infrastructure theft is to dampen demand for scrap metal, he said.
In future, to trade in copper waste and scrap metal applicants will need tax clearance certificates and dealers will be required to submit purchase and sales information to a centralised database, Patel said.
Registered buyers will be allowed to purchase only from registered sellers, which means incidental sales of copper waste and semi-finished products, as well as sales by unregistered waste pickers, will not be allowed. Similar measures are being put in place for ferrous and other metals.
“But ... a number of exceptions have been put in place for certain categories of metal. For example, stainless steel and ferrous waste scrap that is produced in the ordinary course of business as a by-product of the manufacturing process will be excluded. A number of very small metal types, for example aluminium, will also be excluded,” Patel said.
“Beyond these measures, we are looking at a broader set of measures including amendments to pertinent legislation; the prohibition of the use of cash in transactions involving waste and scrap ... no buyer will be allowed to be in possession of scrap unless it’s backed up by an EFT or similar electronic record,” the minister said.
The government believes the ban on the use of cash in transactions involving scrap and semi-finished metal will improve the traceability of transactions, as well as monitoring and enforcement.
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