LETTER: Stopping scrap metal exports would be disastrous

Bekezela Phakathi said in his recent article that SA’s “scrap metal players” could benefit from a ban on scrap metal exports (“Calls for more nuanced approach to metal theft crisis”, April 6). This does not make sense and is not true.

Believe it or not, there are some processors and members of the supply chain that perform a service to the industry and to the country. Stopping exports would be disastrous financially and the resulting oversupply could reduce the value of steel scrap to a point where the costs of recovery are not covered.

Scrap pricing in SA is based on what steel mills are prepared to pay, not what scrap suppliers ask. Scaw Metals CEO Doron Barnes, quoted in the article in question, is a powerful and successful steel mill owner who is pushing for a scrap export ban with the sole motive of increasing the earnings of the steel mills.

Barnes has the ear of the minister, and perhaps other senior politicians, by virtue of the fact that the Industrial Development Corporation (IDC) is heavily invested in his business, and he saved Scaw Metals from financial failure. He cannot get cheaper electricity, nor cheaper labour, so the only input he can attack is the cost of his raw material, namely scrap steel.

However, there is another instrument government can use to reduce local prices of scrap, and that is to increase the export levy. This would make more sense than a ban. Also, how does copper theft affect Scaw Metals? It is a steel producer. Why is Barnes then pushing for a total export ban?

Stolen copper scrap is purchased by indiscriminate buyers who do not check the source. This copper is sold to the next tier in the supply chain, who melt the copper into ingots. Once it is in blocks the policing authorities cannot prove where it came from. Incredibly, these blocks can be exported without any permits or controls, and that is the reason there is such huge demand for copper scrap. There is no duty payable on copper block/ingot exports. This is surely a serious oversight on the part of the government.

The industry perhaps needs a ban on cash payments for scrap, as has been done in other countries. This would create a form of audit trail and make it more difficult for the thieves to obtain hard cash for their stolen metal.

During the early Covid lockdown there was a temporary ban on scrap exports. This measure benefited the steelmakers and caused misery and financial havoc to honest and decent established suppliers within the supply chain. The export of copper blocks was not affected, and the smelters continued to operate without restraint, fuelled by the fact that people were desperate for money during this period.

The fact that the government overlooked this raises eyebrows, especially since the looting and indiscriminate theft of copper and other metals continues, with serious economic consequences.

Michael Oppert
CEO, Treppo Group

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