Regulations on scrap metal exports feared to kill the industry

KAMPALA (Scrap Monster): The proposed curbs on scrap metal shipments out of the country by the South African government are feared to threaten the very existence of the industry.

The government had proposed punitive amendments to the price preference system governing scrap metal exports during December last year. As per the proposed system, scrap metal exporters in the country are first required to offer their stock to domestic consumers at a discount of 10%-30% to the export price. The administration has also complicated the export licensing procedures, with the aim of discouraging scrap metal exports.

According to estimates, the country generates in excess of 3 million tonnes of new scrap every year. The country’s annual scrap exports amount to a maximum of 2 million tonnes. The surplus of 1 million tonnes, if not sold to potential buyers, will lead to serious environmental hazards. The tight regulations on scrap metal exports will add to the surplus.

The proposed regulation states that all scrap metal that has been approved for export has to be routed only through Port Elizabeth harbor. The main intention behind restricting exports through a single harbor is to ensure proper monitoring of goods. However, nearly 100 scrap metal exporters, who account for processing of 80% of domestic scrap, are not based in Port Elizabeth. This may badly impact scrap export volumes, which in turn is feared to affect the country’s GDP.

Also, the proposed regulation is feared to lead to significant job losses. Closing down of export production lines may impact nearly 15,000 formal jobs in the sector. Even more number of informal workers would be affected. Estimates indicate that tens of thousands of informal workers are feared to become jobless.

Meantime, the Metal Recyclers Association has urged the government to scrap the price preference system. Instead, the government must consider implementation of reasonable export levy on all scrap metal exports.