The facts on the scrap metal ban


On 5 August 2022, a draft policy was published proposing to ban the exports of scrap and other metals for a period of 6 months. Apparently over 2 000 comments were received, however the DTIC has only been able to provide 110 of these, so I’m not sure where the balance are. You can read about the original horror story hereOn 30 November 2022, an export ban was put in place for steel and copper scrap metal for 6 months. If the theft continues unabated while the ban is in place, it can be extended for longer.


After deliberations, almost none of the proposed products actually got banned (big sigh of relief), but the products being banned are curious. The first is “Ferrous waste and scrap, remelting scrap ingots of iron or steel except for (i) waste and scrap of stainless steel, and (ii) ferrous waste and scrap generated in the ordinary course of business as a by-product of a manufacturing process“.

This seems to mean that if the scrap is generated in a factory, then it can be exported, but if its generated at a mine, construction site, SOE (Transnet is the biggest scrap steel generator in the country) or household scrap, it can’t be exported. I am not sure how this will be practically controlled. This is relative easy to manage for, say, the automotive sector, where a door panel is quite distinctive. It becomes a lot more difficult for other factories, where the scrap is a lot less identifiable, as in the accompanying picture.

Scrap steel exports have fallen 72% from the rolling year Oct 2011 to Sept 2012, to the most recent period, Oct 2021 to Sept 2022.

This raises the question of how likely the ban is to work. The theft of infrastructure soared during Covid, with this accompanied by the lowest export volumes in the last 10 years. You might recall the 3 months in 2021 when infrastructure theft ground to a halt as an export ban was imposed. Or not, given that it never happened (the drop in theft, not the ban, which caused all kinds of problems, and solved none).


The second is copper scrap, which sounds quite exciting until you realise we hardly export any copper scrap at all. What we do export is 99% brass, which is not what cables are made from. In 2010, we exported 70 000 tons of scrap copper, earning R4bn. In the most recent year (Oct 2021 to Sept 2022), we exported 6 502 tons (90% down), earning R592m (-85%). Given the theft of copper has spiked in the last 2 years, if the stolen copper were being exported, we would expect to see the export volumes of scrap copper to have increased but the opposite has happened. Now it could be, that the brigands don’t develop a conscience when they declare their loot to Customs, but if this is the case, then the ban will not work. It could also be that the copper is smelted or granulated after it has been stolen, making it impossible to identify as cable. These semi-processed products are not covered by the ban, although they do now require a permit from ITAC before they can be exported.

At the same time, our exports of “Unrefined copper, copper anodes for electrifying”, the tariff code used for melted copper blister, has surged 1 342% for the same period. In the most recent year, the value of the exports was R3.7bn.

The current state of the market

There is a surplus of scrap steel in the market, with some scrap consumers either not purchasing further scrap for the year, or setting limits on the volumes they will purchase. Under normal circumstances this scrap would be exported. One large scrap steel consumer sent out this notice to its suppliers last week, before the ban was put in place: “[D]ue to sudden and unprecedented increase in incoming scrap which is much more then our offlloading (sic) capacities, we have to take the the drastic measure of closing scrap intakes till 7:00 AM on Tuesday. Any trucks that do not report to the weigbgridge (sic) by 12:00 midday today would unfortunately be returned back. When scrap intakes resume on Tuesday, the prices for all grades of scrap would be reduced by R250/mt. We hope you understand our situation.”

Extending export permits

When you export any second-hand goods, you need to obtain a permit from ITAC. Unless those goods happen to be melted down copper. This has now changed, which is good. The Price Preference System (PPS) forces a discount on the sale of scrap metal locally, before an export permit can be obtained. Even if there is no interest in the local market, you are still faced with an export duty if you export. Melted copper doesn’t attract an export duty, creating a large incentive to buy up scrap copper, melt it down and then export it. This is a process without a purpose, other than for the arbitrage created by the PPS / export tax combination.

PPS will not apply to products which are banned for exporting, but will continue to apply to other forms of scrap metal.

Control of processing equipment

Once scrap metal has been converted into a semi-processed product it becomes untraceable, but the conversion process requires equipment, such as furnaces, granulators or shredders. This equipment now requires a permit before it can be imported, which is good. I think it would have been better if there was also a requirement to register all current equipment too, but this suggestion did not get accepted.

Information sharing and administration

A central repository will be created for “monitoring crimes linked to metal theft from critical public infrastructure”Hard to argue with this.

There will be enhanced registration requirements for both buyers and sellers of scrap, except for the waste pickers, who don’t have to register but who are also no longer allowed to sell copper. To date, the focus has been on buyers and not sellers of scrap, whereas now both will receive attention. It is not clear how this will practically work. I assume household waste, like an old fridge, will not require the seller to register. Will they now be considered a waste picker? It’s not clear if factories, construction companies, mines and SOEs need to register too.

Registration currently happens at the closest police station, there being no central database of all recyclers. The certificates confirming registration as a second-hand goods dealer and as a recycler are hand written in certificate books, with the police station retaining the carbon copy (I’m not joking. This 1950’s technology is alive and well in the policing of the scrap metal sector). What happens to the information on the certificates remains a mystery, but for as long as it remains only as a smudgy copy in a book, it has very close to zero value.

Given that there is no central point which a buyer can reference, they have to depend on the written certificate to decide if the seller is legitimate. It does not seem a stretch to think that a syndicate, able to steal thousands of kilometres of copper cable, can’t steal a certificate book, or simply have a forgery printed and then filled out in the loopy, incoherent style of the local constabulary.

This appears to remain the case. The lack of a central database makes it very difficult for the industry to help police itself as a given buyer has no way to easily check if a seller is officially registered to trade in scrap metal.

Buyers and sellers have to be tax compliant, which is good. When registering operators could be faced with differential registration fees, with copper traders facing a higher registration fee to “ensur[e] that fly-by-night operators are discouraged from registering to buy and sell scrap metal”. It is not yet clear how this will impact recyclers who trade in a variety of products.

There will be some hectic reporting requirements, which may prove almost impossible to manage in reality. ‘Businesses’ will have to submit detailed purchase and sales information each month through a “single window application” accessible by SARS, SAPS and ITAC. Reports will then be generated from this central database to identify high-risk transactions, which SAPS will use to catch the bad guys. In theory. In reality, this is an astonishing amount of data (there are over 3 000 scrap recyclers in the country) doing many transactions each day. To this we need to presumably add the sellers of scrap (factories, mines and so on), as well as mini-mills, foundries and copper smelters. Then we need people within the 3 government agencies who can understand this data and be able to glean insights. I remain sceptical, given how poorly police intelligence currently performs.

It will be expensive and take a long time to build the software, including methods to connect to the database and insert data. Then the companies need a way to get their internal systems to generate the data required. Bigger companies will find this easier to do, whereas smaller businesses may find this impossible. Given there would not appear to be a link between the purchase and sales data and the police’s hand-written registration data, this seems to be off to a shaky start.

No indication is given on how this data will be validated and what happens if (when) wrong data is inserted, whether deliberately or accidentally, or when someone simply doesn’t submit anything. We have not yet seen the tender document for this service.

There are special extra restrictions on who can sell copper scrap and semi-processed copper. Only businesses that either produce scrap copper as a by-product of their manufacturing process, or “traders and semi-finished producers that are up to date with their reporting requirements”. Only registered buyers will be able to buy copper scrap.

Regional coordination

Consideration is being given to restricting the ports through which scrap can be exported. This has been mooted before and turned down. In theory this serves to make it easier to control what moves through the ports, in practice, this has been hijacked to force up the cost of exporting and so drive down the price of scrap metal locally.

There is a proposal to coordinate with other African states to avoid a situation where the bandits move to neighbouring countries to avoid the onerous administrative requirements.

Eventually the sale of scrap metal for cash will be prohibited, but that is a while off.

Companies who don’t comply with the new rules will be blacklisted and won’t be able to deal with the state. I think this refers to administrative offences, such as not submitting the correct data, rather than criminal offences.

We will soon be launching the XA Guide to trading in Scrap Metal.

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