South Africa’s steel industry has revived its call for the government to end the ban on scrap metal exports after more than a year, saying it was threatening to collapse the whole industry.
SOUTH Africa’s steel industry has revived its call for the government to end the ban on scrap metal exports after more than a year, saying it was threatening to collapse the whole industry.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) on Monday called on the Minister of Trade, Industry and Competition, Ebrahim Patel, not to take a narrow and short-term view on the way forward regarding the scrap metal regulations.
This is in anticipation of Patel’s decision on the way forward regarding the regulations and following the extended public comment period, which closed last month.
In November 2022, the Department of Trade, Industry and Competition (the DTIC) imposed a ban on the exports of ferrous and copper scrap in a bid to reduce the theft of infrastructure by removing a market for the stolen goods, and thereby suppressing the price enough to disincentivise theft.
Seifsa has previously warned the scrap metal export ban was misguided and “an extremely blunt measure” with unintended industrial policy consequences as vandalism and theft of steel and iron was still taking place even if the scrap was not exported.
This ban was extended by another six months on July 31 last year and by another six months again, and now the department is proposing to extend it again for another six months.
In addition, the International Trade Administration Commission of South Africa (ITAC) suspended the operation of the Price Preference System (PPS) for the exportation of ferrous and non-ferrous waste and scrap metal for the same period.
The PPS forces scrap recyclers to offer their scrap to the consumers at a minimum discount before they are allowed to export, and if there are offers at PPS or higher, they are denied an export permit. The PPS price is R4,758, a third of the global price.
Seifsa, a national federation representing 18 independent employer associations in the metals and engineering industries, said Patel must rather consider the broader consequences of the decision and what is best for the industry in the long-term.
Seifsa chief operating officer Tafadzwa Chibanguza said the scrap metal export ban was not at all effective in combating infrastructure damage and theft of scrap metal.
Instead, Chibanguza said the imposition of the export ban had caused more economic harm than good.
“This is evidenced, inter alia, by the policy being one of the contributing factors to the announcement by ArcelorMittal South Africa on the possible closure of its long-products business,” Chibanguza said.
“The export ban also communicated a very poor economic signal where blunt industrial policy instruments are deployed to combat crime, which resulted in a myriad of unintended consequences.”
In November, ArcelorMittal South Africa announced it would shut its long-products foundries in Newcastle and Vereeniging as a result of high logistical and transportation costs, inadequate demand, the ban on export of scrap metal, and load shedding for their poor performance.
ArcelorMittal is South Africa’s largest steel producer and the closure would result in the retrenchment of more than 3 500 workers.
In December, Global Trade Advisors also said the ban needed to be immediately lifted unless hard evidence can be produced of the reduction in theft of infrastructure as a result of the ban.
Meanwhile, Chibanguza said the lapsing of the scrap metal export ban on December 15 and the extension of the public consultation period to January 12 had brought to the fore the fact that alternatives to an export ban were a very real possibility.
He said the first of was the development of an industry pledge, co-created by the DTIC and industry to work together to combat the movement of illegitimate scrap metal.
“This will be done by, inter alia, the phasing out of the use of cash in scrap metal transactions, rigorously inspecting the origins of scrap metal, and an industry zero-tolerance approach to purchases of scrap metal from unidentified sources or where the product may reasonably be suspected to be from stolen public infrastructure,” Chibanguza said.
“However, a pre-condition for the successful development of this industrial policy framework is ensuring demand for steel and related products through consistent and large-scale public projects. To date this has been a major constraint to the economic benefits of the steel sector, which has resulted in production contraction and a structural decline in employment.”
– BUSINESS REPORT