The Department of Trade, Industry and Competition (DTIC) has released its draft policy proposals to regulate and restrict the trade in scrap metal in South Africa for public comment.
The draft policy changes are a direct result of President Ramaphosa’s State of the Nation Address in 2022, where he pledged to tackle rising crime in the scrap value chain, particularly with copper theft and other metals stolen from public infrastructure.
Thefts of copper and other metals hit South Africa’s infrastructure hard, leading to lengthy power outages in neighborhoods and industry, and even toppling entire rail systems for months.
Ramaphosa said in his SONA that “the damage caused by the theft of scrap and cable to our infrastructure such as electricity, trains and other vital services is enormous. We will take decisive steps this year, both through improved law enforcement and by considering further measures to tackle the sale or export of such scrap.”
According to the DTIC, citing research by the Trade and Industrial Policy Strategies and Genesis Analytics, copper theft from the country’s rail and electricity networks will entail annual economic costs of more than R45 billion in 2020/2021.
“The costs arising from the theft of steel and other metals are also serious. To illustrate, the damage from stolen steel grilles alone was R100 million in 2020/2021. As with cable theft, the destruction of pylons and other transmission supports can lead to widespread loss of electricity,” it said.
The department said stolen copper, steel and other metals go through various processes and are mainly exported across the border as scrap. Scrap metal is a legitimate trade in the country, making it difficult to detect the illegal trade and export.
Criminals can easily do their business on the black market because it is cheap to import furnaces to transform the metals, and there is no formal license or regime for registered traders to distinguish the legitimate sellers from the untrustworthy ones.
The department proposes many policies to put an end to this, including:
- Imposing a six-month ban on the export of scrap from South Africa;
- Extension of the definition of waste and scrap to other common types of metal that are exported;
- Temporary suspension of the preferential pricing system (PPS) for scrap exports, with some exceptions;
- Developing a licensing system for the export of these metal products;
- Developing a licensing system for the importation of furnaces and other scrap processing machines;
- Creating a scrap seller registration regime with improved registration and strict reporting requirements;
- Restrictions on who can sell scrap and adding requirements that buyers only buy from registered sellers;
- Tightening up border controls;
- Ban on the use of cash in scrap transactions;
- Blacklisted offenders.
“The temporary ban on the export of waste and scrap and the introduction of a licensing system for the export of semi-finished products is likely to lead to a significant reduction in the theft of metal from the country’s infrastructure, including energy and transport infrastructure, causing significant will benefit the South African economy,” the department said.
“The prohibition and licensing system is expected to achieve this goal by eliminating or reducing one of the ways to monetize stolen metal, which is exports.”
The ministry added that because these interventions will lead to significant amounts of scrap in the local market, it will also lead to lower prices, which is likely to deter theft.
“These interventions will lead to a formalization of the metal trade, whereby only legally compliant and transaction-transparent companies can legally trade in scrap and semi-finished metal products.
“This, in turn, will allow for closer monitoring of the physical movement of these products, and more targeted enforcement activities, significantly increasing the risks associated with trafficking in stolen goods,” it said.
The proposed measures can be read below:
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