EDITORIAL: Scrap metal export ban an admission of defeat

It is hard to imagine more of an admission of defeat by 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 estimated to be costing SA’s economy about R47bn a year. The impact is felt daily, in the trains that don’t 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 state-owned 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 haven’t 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’ve 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 law-enforcement 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 ensure it doesn’t trade in stolen goods. But 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 and competition minister Ebrahim Patel explained the ban on December 1 suggested that he too had 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’s 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 when metal is stolen it is exported: only about 13% of the scrap metal that recycling companies collect is exported.

Part of the answer is that it’s not the scrap that’s being 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 semi-processed 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, such as Scaw Metals, have been vocal supporters of such a ban. Steel mini-millers 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 measures 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 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.