How the ban on exporting scrap metals has affected SA

According to the Metals Recycling Association of SA, the scrap metal industry contributes R15bn ($906m) to SA’s GDP and employs about 350,000 people. Over 60% of scrap metal revenue is generated from the mining, manufacturing and construction industries.

Valuable scrap metals in SA include copper, aluminium, steel and lead due to their high demand, limited availability and economic value. In 2023, SA’s scrap metal exports totalled R5.2bn, with manganese (R2bn), iron and steel (R1.6bn), and aluminium (R1.1bn) comprising 80% of the exports. Leading markets for these exports include India (R1.6bn), Japan (R1.1bn), the US (R707m), and China (R322m).

In November 2022 the department of trade, industry and competition implemented an export ban on ferrous and copper scrap metals. This measure aimed to combat copper and ferrous metal theft by eliminating a market for stolen goods and lowering prices to discourage theft.

Theft and export of copper cables have adversely affected the economy, leading to power cuts and disruptions on rail lines. However, the ban — initially set from November 2022 to May 2023 — was extended for an additional six months until December 2023 due to its continued adverse impact on the legal copper industry and its failure to curb illicit exports or money laundering of illegal copper proceeds domestically or internationally.

According to the department, the annual economic ramifications of copper theft from SA’s rail and electricity infrastructure exceeded R47bn. This adversely affects economic growth by disrupting supply chains and elevating production expenses. Furthermore, service delivery experiences setbacks, with damaged rail lines stemming from theft resulting in train cancellations and delays.

The ban on scrap metal exports affected South Africans who mostly rely on selling legal scrap metal, and waste pickers who collect scrap metal. In 2023, their incomes likely decreased due to reduced demand for scrap metal from global markets such as the EU and Asia affecting the availability of scrap metal for sale by waste pickers and sellers.

Consequently, SA experienced a 38% decline in its scrap metal exports. Being a net exporter of scrap metals, the country exports at least R4.5bn worth of scrap metals annually. The ban significantly affected the scrap metal trade, including nonferrous metal exports. Specifically, exports of nonferrous metals such as lead, aluminium and zinc recorded declines of 39%, 33% and 17% respectively.

India, which accounts for more than 30% of SA’s scrap metal exports, reported a 43% decrease from R2.7bn in 2022 to R1.6bn in 2023, primarily due to reduced exports of scrap copper and ferrous metals.

Key participants in the scrap metal industry such as ArcelorMittal and Insimbi Industrial Holdings, faced significant repercussions from the ban on ferrous and copper scrap metal exports. For example, because of the ban Insimbi Industrial Holdings reported a 5% decrease in revenue, from R6.1bn to R5.6bn, with the ferrous division being the most affected.

In October 2023, Insimbi Industrial also reported lower profits and a 95% decrease in cash generated for the six months to end-August as it grappled with the effect of the ban on the exports of ferrous and copper metals.

To address the challenges of scrap metal theft in SA and potentially lift the ban, several solutions and strategies could be considered such as enhanced regulation and enforcement. The country could implement stricter regulations and enforcement measures to combat scrap metal theft. This could include requiring sellers to provide identification and proof of ownership for scrap metal transactions, as well as increasing penalties for illegal activities.

For example, the SA government may look to the Scrap Metal Dealers Act in the UK, which requires scrap metal dealers to be licensed and imposes fines or imprisonment for noncompliance.

In addition, the country should increase public awareness about the effects of scrap metal theft and the importance of reporting suspicious activity, by engaging with local communities, businesses and law enforcement agencies to foster collaboration in combating the problem.

For example, the Scrap Metal Theft Awareness Programme in the US educates the public about the consequences of scrap metal theft and encourages community involvement in prevention efforts.

Collaboration with industry stakeholders, including scrap metal dealers, manufacturers and recycling companies to develop solutions and share best practices for preventing theft and promoting responsible practices, would also be helpful.

The Scrap Metal Dealers Association of SA, SA Police Service, Metals Recycling Association of SA and business should come together to co-ordinate efforts in combating metal theft and promoting industry standards.

• Dube is an analyst, and Ngwenya an intern, at strategic research and advisory consultancy Birguid.