Scrap metal export ban an admission of defeat

IIF THE STATE CANNOT FIX LAW ENFORCEMENT, CRIME SYNDICATES WILL CONTINUE TO PLY THEIR TRADE

t is hard to imagine more of an admission of defeat by the government than its recent decision to impose a six-month ban on the export of scrap metals. It has in effect thrown up its hands and conceded that SA’s law-enforcement agencies are unable, or unwilling, to deal with the highly organised criminal syndicates that run lucrative operations stealing cable and other infrastructure. Instead, it is experimenting with an export ban that is more a misguided attempt at industrial policy than an effective effort to fight crime. Chances are we will see very little impact on cable theft during the six months of the ban, though we would love to be proved wrong.

Cable and infrastructure theft is officially estimated to be costing SA’s economy about R47bn a year. The effects are felt daily, in the trains that do not run because the cables or tracks have been stolen, and the power and telecoms outages caused by the theft and destruction of cables, batteries, even pylons.

The problem has escalated over the past five years, with stateowned entities such as Transnet and Eskom reporting exponential increases in the quantum of stolen cables, tracks and other metal infrastructure. The high commodity prices of the past two years have not helped, making it even more lucrative to steal copper and other high-priced metals.

And while leaders of the state-owned entities have got together to combat what they have called the sabotage of economic infrastructure, this is not sabotage — it is crime. And sophisticated crime at that, led by people who can and do infiltrate lawenforcement agencies and government officials as well as the likes of Eskom and Transnet themselves.

There are already several legislative measures in place to control the legitimate scrap metal industry and to ensure that it does not trade in stolen goods. But the government’s argument is that it is imperative to cut off demand from abroad for the stolen metal if it is to stop the criminal activity.

Disturbingly, the way trade, industry & competition minister Ebrahim Patel explained the ban on December 1 suggested that he too has given up on crime intelligence and policing as an option to curb cable theft. “It is practically impossible to police all of this infrastructure all of the time,” he said. Therefore, he explained, the new measures “seek to reduce the demand for scrap metal from the lucrative global market while simultaneously disrupting criminals’ transport and logistics networks”.

There is just one big flaw in the argument: scrap metal export volumes have been falling for several years, just as cable theft volumes have been increasing. And that includes copper. Trade expert Donald Mackay says it is not clear where the idea originated that metal is exported when it is stolen: only about 13% of the scrap metal that recycling companies collect is exported.

Part of the answer is that it is not the scrap that gets exported, certainly not by legitimate routes, but rather melted down and processed metal. That means banning scrap exports is unlikely to work; and while Patel’s new measures include significant semiprocessed metal, that may or may not have come from scrap, and banning it could impose a whole different set of distortions on legitimate manufacturers.

As Mackay has pointed out, though, there are some potential beneficiaries of a ban on scrap exports and some, like Scaw Metals, have been vocal supporters of such a ban. Steel minimillers who use scrap to make steel may benefit from lower prices and better access to scrap, even though Patel had already put some protections in place for them. At the other end of the scale, the impact on the waste-pickers who rely for their livelihoods on collecting metal for recycling could be negative.

The six-month ban is aimed at trying to hold the fort, as it were, while Patel puts better regulatory steps in place. Some of the planned measures, such as banning cash trade in scrap and semi-finished products and improving customs inspections, are sensible and could help.

In the end, however, if the government cannot fix its own ailing intelligence and law-enforcement agencies, the crime syndicates will continue to ply their destructive trade at the economy’s expense.