READER LETTER | 11-year scrap metal swindle hurts us all

I write on behalf of the Scrap Recycling Coalition. My family has been involved in scrap-metal recycling since 1903 and I was on the national executive of the Metal Recyclers Association for 15 years.

The system introduced by then trade & industry minister Ebrahim Patel in 2013 — ostensibly to ensure the supply of “good quality affordable scrap” — was laughable.

SA steel scrap mini-mills were already getting all the scrap they wanted for about 40% less than mini-mills overseas were paying for it, with only the scrap that was excess to their requirements being exported.

The mini-mills would take the international price paid by their foreign contemporaries then deduct ocean freight, local port charges and transport from Gauteng to the coast to arrive at the deeply discounted price they then offered the big recyclers in Gauteng.

This is known as export parity pricing.

Patel's price preference system (PPS) discount on steel scrap forces recyclers to supply the local mini-mills at a further $50/tonne reduction, plus the recycler has to pay the cost of getting the scrap to them.

From Cape Town, for example, this adds another $60/tonne to the recyclers' costs. 

The steel mini-mills are collectively subsidised by R500m every month by forcing this dirt-cheap price on the recyclers and this great swindle has been going on for more than 11 years.

It is important to understand that this money is coming out of the pockets of every South African — manufacturers, mines, construction companies and private individuals — not only the masses of subsistence waste-pickers eking out a meagre living while cleaning our streets and garbage dumps, because recyclers have to drop their buying prices in line with the PPS selling prices.

The export duty was meant to replace the PPS, but then Patel decided unilaterally to keep them both.

This means SA now sells its scrap metal dirt cheap — and pays taxes on scrap that is unusable and unwanted locally.

Both the PPS and the export duty need to be removed immediately so that the productive part of the economy can stop subsidising this hopelessly inefficient little business sector.

Mark Fine, Scrap Recycling Coalition