State sets its sights on thriving scrap metal black market

The government has outlined plans to rein in the thriving illicit scrap metal industry, which has over the years caused SA’s key economic infrastructure to be vandalised, necessitating billions of rand in repairs.

The department of trade, industry & competition has previously said that the theft of public infrastructure for resale as scrap costs R47bn in damage annually to the economy.

In a bid to address this, the government in a gazette published on Friday said it aimed to compel sellers of scrap and waste metal to be registered and tax-compliant to curtail illicit flow of goods in the industry.

“While the Second-Hand Goods Act contemplates that both buyers and sellers of scrap and waste metal are required to be registered, this requirement is ... being enforced against buyers but not sellers,” reads the gazette.

Registration

“Going forward, the government intends to enforce the requirement that scrap and waste metal sellers are subject to the registration regime envisaged in the [act]. It is envisaged that a registration exemption will apply in relation to waste pickers (but not in relation to copper scrap and waste metal).

“While semifinished metal products fall within the scope of application of the [act], buyers (and sellers) of semifinished metal products are not currently registered. The government will thus take steps to ensure that these businesses are registered.”

The government is also proposing to beef up reporting in the industry by introducing an input-output system “that will be used both for purposes of compliance monitoring under the [act] and for monitoring exports of scrap and waste metal and semifinished products”.

The state said this would require scrap and waste dealers (buyers and sellers) to submit monthly electronic reports via the Metal Trading System to the International Trade Administration Commission (Itac).

It said this system would reveal all purchases and sales of metal products (scrap, waste, semifinished and finished) by volume and value.

However, this proposal has not gone down well with industry players. Donald MacKay, CEO of XA Global Trade Advisors, said the electronic system proposed fell short of the required standards.

Sensitive data

“My primary concern with the software is that companies may be reluctant to share their very sensitive data. At the beginning of the year, Itac was hacked and data was stolen, so this is not an idle concern,” he said.

“I’m also worried about how well the software will function, especially when it has to cope with thousands of transactions. Government doesn’t have a history of building robust software.

“Finally, the scrap recyclers have not been part of the process of designing the software, or for that matter any of the initiatives to reduce cable theft. The result has been many interventions that have harmed the sector but have done nothing to reduce the theft problem.”

Transnet, a key cog in SA’s economy, has been one of the entities affected by vandalism to its infrastructure, causing delays and possible derailments.

Business Day reported last year that the cable theft malaise that has besieged Transnet’s railway line connecting Durban and Gauteng has spread to the Northern Cape. Transnet Freight Rail in its 2022 annual report said there was an exponential increase in cable theft over the past five years, with more than 1,500km of cable stolen (a 1,096% increase), with a net financial impact of R4.1bn.

Scrap metal thieves have also targeted Eskom’s infrastructure.

One of the measures the government previously put in place was banning exports of scrap metals, with little success and negative consequences for the country’s steel producers.

The gazette shows that the government wants to include semifinished metals in the proposed registration regime.

“The government is also considering imposing a requirement that registered buyers may only purchase copper scrap, waste, semifinished [and] finished copper products from registered sellers of such products. The effect of this would be that all sales of scrap, waste, semifinished and finished copper products will be prohibited other than between registered entities or persons.”

majavun@businesslive.co.za
khumalok@businesslive.co.za