Government puts final screw into scrap metal deals

The government has tightened what may be the last screw in the battle against vandalism of infrastructure, especially copper, at utilities including Transnet, Eskom and the Passenger Rail Agency of South Africa by requiring sellers to be registered entities, which could perplex random collectors and ensure accountability between dealers and sellers.

In a gazette released on Friday, the government said it would restrict and regulate trade in ferrous and non-ferrous metals waste, scrap and semi-finished metals to limit damage to infrastructure and the economy, which at the end of April this year stood at about R46.5 billion, according to data from the Department of Trade, Industry and Competition.

The latest decision follows two successive periodical bans on the trade in scrap metal which had the industry in uproar, as the bans were claimed to have affected the livelihoods of more than 300 000 people who eke a livelihood from the collection of scrap.

According to the latest directive, registration as scrap metal buyers and sellers will only be granted to businesses that have a satisfactory tax compliance status, subject to the registration regime envisaged in the Second Hand Goods Act (SHGA), with exemption granted only to pickers, but not in relation to copper scrap metal.

The SHGA stipulates that both buyers and sellers of scrap metal are required to be registered. This requirement is currently being enforced against buyers but not sellers.

The government in November last year said a licensing system for copper trading would be launched in six months. Amendments to existing legislation, such as prohibiting the use of cash in transactions involving waste or scrap metal, will be gazetted.

“Buyers must show an electronic banking record for the scrap metal they possess,” the gazette said.

Former Transnet CEO Portia Derby said earlier this year that the ban on the export of scrap metal initiated by the government to curb the theft of copper cables and other grid infrastructure had inadvertently created cartels – an unintended consequence of scrap metal dealers “appearing to talk to each other”.

According to the gazette, an input-output reporting system will be introduced that will be used both for compliance monitoring under the SHGA and for monitoring exports of scrap metal and semi-finished products.

The government has imposed a requirement that registered buyers may only purchase copper scrap or semi-finished copper products from registered sellers of such products.

“The effect of this would be that all sales of scrap and semi-finished copper products will be prohibited other than between those registered,” it said.

The reporting system will require scrap dealers to submit monthly electronic reports to ITAC (International Trade Administration Commission), showing all purchases and sales of metal products, scrap, semi-finished and finished, by volume and value, it said.

The new regulations require periodical submission of the trade in scrap from dealers, detailing the date of sale, the type of metal sold, the grade of metal sold, the tonnage sold, the total revenue of the sale, the business registration number of the buyer and, in the case of an export sale, the Unique Consignment Reference (UCR).

According to the Metal Recyclers Association, most scrap was generated from big industries such as mining, manufacturing and construction and certain exotic metals – such as tungsten, titanium and nickel variants – did not have any consumption market in South Africa.

About 3.5 million tons of bona fide scrap metal were collected in South Africa every year, most of which originated from the mining, manufacturing and construction sectors. At least 90% of this comprised iron and steel scrap, with a domestic value of R2.50 – R4 per kg, and about 3% of this volume is copper scrap, with an average unit price of around R100 per kg, it said.

Author: editor

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