Competition watchdog in search-and-seizure hit on scrap metal buyers

The Competition Commission on Friday descended on the premises of four scrap metal purchasing companies in Gauteng in search-and-seizure operations as part of its probe into price fixing in the industry.

The competition watchdog said it has reason to believe Scaw South Africa, Cape Gate, Shaurya Steel, and Unica Iron and Steel have engaged “in fixing the purchase price of shredded or processed scrap metal”, with the companies now vulnerable to hefty fines should they be found guilty of anti-competitive behaviour.

“It is alleged that these firms have made price adjustment announcements of the same amount for implementation at more or less the same time,” the commission said.

“The companies under investigation operate as buyers of shredded or processed scrap metals, which they use in the production of long steel products.”

South Africa’s long steel production industry is already facing serious headwinds with the closure of the unprofitable long steel division of ArcelorMittal South Africa (Amsa).

The search and seizure operation is in furtherance of a complaint laid with the commission three years ago, with the watchdog having approached the high court in Pretoria for a search warrant.

Priority sector

“Scrap metal forms part of the industrial intermediary products, which is the commission’s priority sector,” commission boss Doris Tshepe said in a statement.

“Dismantling any alleged price-fixing cartel in the market will go a long way towards eliminating any existing artificial barriers to entry and create a conducive environment for all firms, in particular small businesses and firms owned by historically disadvantaged persons, to enter and participate in the market.”

Based on the commission’s history, it might be a while yet before it concludes its investigation and makes findings, with the entity still seized with several investigations, including into eight of South Africa’s largest insurance companies.

The prevalent use of cash transactions in the sale of scrap steel in South Africa has also been a point of contention for authorities.

The International Trade Administration Commission of South Africa (Itac) last year moved to bar cash transactions in the sale of scrap steel.

This is as the country moves on from the damaging greylist it was on over the past two years due to lax anti-money-laundering laws, which it has since tightened.

The move by Itac, which manages South Africa’s import and export controls and conducts trade remedy investigations, is part of the review of the 2013 price preference system for scrap metal.

One of the main features of the new regime will reduce the discount for domestic ferrous scrap-consuming industries from 30% to 25%.

The government in 2024 also outlined plans to rein in the thriving illicit scrap metal industry, which has over the years caused South Africa’s key economic infrastructure to be vandalised, necessitating billions of rand in repairs.

The department of trade, industry & competition has previously said the theft of public infrastructure for resale as scrap costs R47bn in damage to the economy annually.

In a bid to address this, the government compelled sellers of scrap and waste metal to be registered and tax-compliant to curtail the illicit flow of goods in the industry.