State set to restrict scrap metal exports
• Cabinet approves package of measures to try to slow down theft of public infrastructure
The government is set to introduce tighter measures to curb metal infrastructure theft, including possibly banning the export of scrap metal, despite objections by a number of stakeholders and the EU, a key trading partner.
On Friday, the cabinet said it had considered and approved a comprehensive package of measures to tackle the damage to public infrastructure and the economy by restricting trade in waste scrap and semiprocessed metals.
This follows 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 economy about R187bn a year.
The department proposed that exports of ferrous and nonferrous waste and scrap metal be banned for an initial period of six months from the date of publication of the final notice.
During a post-cabinet briefing on Friday, minister in the presidency Mondli Gungubele said the department of trade, industry & competition would publish the finer details of the measures in the coming days, as soon as the necessary legal work had been done.
The department told Business Day it hoped to provide comprehensive details on the measures next week.
But, speaking during the briefing on Friday, Stephen Hanival, the department’s chief economist, gave the clearest indication that exports of scrap will very likely be banned for a certain period.
“We have looked at what other countries have done. Kenya, for example, imposed a permanent ban on scrap metal last year.
“We have chosen what we believe is the least intrusive but most likely set of interventions to be effective in addressing the scourge of scrap metal trade ...
“We do have an independent legal opinion from a highly respected law firm indicating that within the WTO [World Trade Organization] law, we are
operating entirely within our rights,” Hanival said.
During the public consultation phase, the EU objected to a proposal to ban the export of scrap metal, 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 between July 2021 and 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 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 a recent submission.
Critics suggested that the EU’s submission smacked of double standards as it was also looking into banning the export of scrap of European origin to countries that do not have EU waste management standards.
Hanival said: “Of course, the EU is an important trading partner. There have been discussions with the EU around why SA needs to implement a comprehensive package of measures to address the damage to public infrastructure.”
He said SA was within its rights to take steps to curb damage to public infrastructure.
“We are operating entirely within our rights. We do have exceptions for our domestic policy to take account of what the WTO calls public morals, criminal activity if you like, as well as national security. So, our interventions are positioned in terms of those exceptions.
“We also have an opinion from a body based in Geneva which analyses WTO decisions and those of member states, and that opinion gives us comfort that SA is operating entirely within the WTO framework and what is required of us under our sovereignty.”
Trade expert Donald MacKay recently said banning scrap metal exports would not curb infrastructure theft because export volumes of scrap have been falling in recent years, suggesting that wholesale looting of infrastructure was being driven by local demand.
MacKay, who is also a director at XA International Trade Advisors, noted that while SA shipped out about 1.8-million tonnes of scrap in 2012, amounts had been steadily declining over the past decade to about 500,000 tonnes in the current year.
DA MP Mathew Cuthbert said if the government does in fact proceed with the ban, it will have a devastating impact on the downstream steel industry and the metal recycling industry in particular.
“We have consistently argued that this is a crime-related issue and not a trade policy issue, and we are of the view that the country’s law enforcement authorities need to be adequately resourced in order to combat this type of crime.
“Thus far, national government has failed to provide the requisite resources in order to do so,” he said.
Furthermore, any export ban will be a poorly disguised attempt to benefit the upstream steel industry at the expense of the rest of the industry as the former stands to benefit directly from depressed scrap metal prices, Cuthbert said.
“Lastly, we are still concerned about the way in which the public participation process was conducted and feel there are several issues which point to unfairness and partiality on the part of the ministry and department which have remained unanswered,” he said.