Recent amendments to the published export guidelines for ferrous and nonferrous waste and scrap have created uncertainty among small and medium-sized scrap merchants who fear that they could be forced out of the market because of the more stringent measures, according to a Business Day report.
The initial export guidelines published by the Department of Economic Development last year were aimed at making sure local scrap metal users in South Africa had sufficient material, yet since their publication several concerns have been raised about possible anticompetitive outcomes and effects on small merchants that are focused on the export market.
The amendments to the initial policy, published in May, have seen a flood of correspondence to the International Trade Administration Commission (Itac), which is responsible for the implementation of the policy.
Smaller scrap merchants say if amendments are implemented, dealers leasing yards will be excluded as only owners will be allowed to export. They say they will have less working capital because of the new seven-day payment period. They also say job losses may be unavoidable.
The department last year introduced measures through its published guidelines to allow foundries, mills and secondary scrap processors to buy scrap at a preferential rate of 20% below the international spot price that South African exporters can get for waste metal. Scrap merchants have to offer their waste to local buyers before applying for export permits.
South Africa exports about 1.5 million tons of scrap metal every year, which is 40% of the country’s collections.
Smaller scrap dealers claim the amended guidelines will entrench the position of bigger scrap merchants given their current relationship with foundries as their “authorised dealers”.
Economic Development director-general Jenny Schreiner said in response to concerns that South Africa could not allow scrap metal exports that took advantage of soaring global prices to undermine local producers and encourage the theft of cables, sewer lids and other important infrastructure elements.
“The new price-preference provisions seek to sustain local foundries that will increase local value-add as well as jobs.”
“The available evidence shows that the guidelines will promote job creation. They are critical for future economic development, as they will assist local steel mills, secondary smelters and foundries to acquire affordable, quality scrap metal for local processing,” she said.
Smaller merchants — who did not want to be identified — said domestic users had already started “flexing their muscles” in terms of the proposed amendments and that a lot of “animosity and bad blood” was brewing between the scrap trade and domestic users.
One of the dealers said foundries traditionally did not buy directly from smaller dealers as they did not meet their requirements. They had the freedom to export what was not sold in the domestic market. Small dealers said in correspondence to the International Trade Administration Commission that they found themselves in the position where offers were made by local buyers, but they had no intention of buying it. It was merely a ploy to prevent them from getting an export permit.
Itac said it could not respond to the allegations. The amended guidelines stated that Itac would not issue an export permit where, prior to the expiry date of the circulation period (which is currently three weeks) — a valid offer had been made. If no agreement was reached, an export permit was issued within three working days, Itac said.
The Competition Commission has since confirmed that it met the department and Itac to discuss concerns raised by industry bodies about anticompetitive provisions in the export guidelines. The Competition Commission said there had been allegations of collusion made by some of the industry players, but none of the allegations were backed up by a formal complaint that could be investigated by the Competition Commission.
Ms Schreiner said the export permit guidelines provided for a technical working group to discuss the administration and implementation of the price preference system. But the Competition Commission was concerned that the working group could be used to share price information.
“After we clarified that the group’s engagement would be limited to administration of the system, the commission was satisfied. It is well known that in its role overseeing the competition authorities, the Department of Economic Development has worked actively to stop price collusion, and we have no intention of changing this stance,” Ms Schreiner said.
