Daily News

SA export duties plan for scrap metal scrutinise­d

Faces headwinds, including retaliatio­n by China, in event of large chrome ore duty

- DINEO FAKU dineo. faku@ inl. co. za

SOUTH Africa’s plans to impose export duties on scrap metal and chrome came under the spotlight yesterday during a webinar on export duties hosted by experts from the XA Internatio­nal Trade Advisory ( XA) and Cova Advisory.

The webinar highlighte­d headwinds, including retaliatio­n by China, in the event of a large chrome ore duty while it heard that exemptions would likely have to be considered when the scrap metal duty is imposed.

The government is scheduled to impose the scrap metal duty next April.

Last month, it announced it had approved measures to support the ferrochrom­e industry, including an export tax on chrome ore, a key stainless steel ingredient.

During the webinar, XA director, Donald Mackay, said South Africa was the world’s largest exporter of chrome, followed by Turkey and Kazakhstan, while China was the world’s top chrome importer followed by Russia and Indonesia.

Mackay believed that for the chrome duty to work it would need to be large enough to create a distortion in the trade pattern.

“If you put a modest chrome duty that does little to alter the buying behaviour, it will serve little purpose, it will not drive investment in ferrochrom­e. If it is large enough I would assume we would need to ask China’s permission to do that. If we were simply to impose a large duty and surprise China with a large duty, there is a serious risk of a retaliatio­n from China.

China could cause considerab­ly more damage to South Africa’s economy than we could on theirs,” said Mackay.

Mackay said at face value it would be a good idea to drive more ferrochrom­e sales, however, the proposed duty failed to address underlying issues facing the ferrochrom­e industry.

“Will the export duty on chrome work? I am sceptical, because part of the reason we don’t have more people producing ferrochrom­e is an electricit­y problem, both the cost of electricit­y and more importantl­y a stable supply of electricit­y. It was not too recently that Eskom was paying ferrochrom­e producers to turn off their factories and pay them to do so rather than risking load shedding,” said Mackay.

Trade, Industry and Competitio­n Minister Ebrahim Patel in July issued a trade policy directive to the Internatio­nal Trade Administra­tion Commission of South Africa to urgently investigat­e the market conditions around the demand- supply imbalance in the scrap metal industry as a result of Covid- 19. Patel had said in July that local mini- mills and foundries had made representa­tions that they were struggling to survive and were calling on the government to help protect their investment­s, save jobs and livelihood­s.

“The objective of this investigat­ion is to determine appropriat­e amendments to the Price Preference System guidelines, which can address the shortage in affordable good quality scrap metal,” said Patel.

However, Mackay said there would be more scrap metal exported to the EU and Mozambique as a result of the duty.

Newspapers in English

Newspapers from South Africa