Seifsa cites problems with proposed amendments to scrap metal trading laws

Industry body the Steel and Engineering Industries Federation of Southern Africa (Seifsa) has criticised the proposed amendments to the Regulations to the Second-Hand Goods Act put forward for public comment by the Civilian Secretariat for the Police Service on July 12.

Seifsa president Elias Monage said on July 24 that the organisation believed the proposed amendments were not proportionate or appropriate industry regulation to achieve the desired ends and minimise resultant harm.

He added that the proposed amendments would have “severe” unintended consequences and would offer no further assistance to government in achieving the aims and objectives of the draft policy on measures to restrict and regulate trade in ferrous and nonferrous metals waste, scrap and semi-finished ferrous and nonferrous metal products to limit damage to infrastructure and the economy.

ENHANCED REPORTING

Monage noted that the proposed amendments envisage an enhanced reporting system that would require the submission of monthly electronic reports through the Metal Trading System (MTS), showing all purchases and sales of metal products.

“While we support reasonable and rational reporting requirements to track the trade in scrap and waste metal, which are already required under the Second-Hand Goods Act, the submission of the very granular detail envisaged under the MTS has not and cannot be accepted by industry in its current form and its attempted introduction under the guise of an amendment to the Regulations of the Second-Hand Goods Act is not action in good faith,” he said.

He highlighted several critical concerns regarding the proposed MTS and required information disclosure.

First, it would render the required information disclosure open to legal challenge and review on the grounds of it being disproportionate, irrational, unreasonable and ineffective and not being the rational modus or response for curing the “mischief it is intended to curb”, he said.

Second, he pointed out that the MTS would raise serious issues of disclosure and abuse of confidential and proprietary information which concern has been exacerbated by the security breach suffered by the Department of Trade, Industry and Competition (dtic) on January 2.

Third, Monage asserted that the MTS would not assist the authorities, as those involved in illicit trade would ignore and disregard any such requirements.

“Criminal activity can never be managed by way of regulation. Regulations are adhered to by responsible and law-abiding citizens. Criminal activity requires efficient and stringent policing and the imposition of severe penalties and sanctions. Policing of illegal operators and illegal activity and criminality in the whole value chain across all metals in South Africa must be far better implemented and enforced in order to curb metal-related crime in South Africa,” he said.

Fourth, he raised concerns over the disclosure of proprietary information to and possible abuse by individuals from government departments and law enforcement agencies who had been accused of being allegedly complicit in criminal conduct but had yet to be removed from their positions of authority.   

ELIMINATION OF CASH

“We are most concerned that the prohibition on the use of cash in scrap and waste metal transactions will result in unintended economic consequences and hardship for the informal sector/waste pickers who comprise a large bona fide segment of the supply/value chain,” Monage said.

He stated that a proposed blanket prohibition on cash would threaten the existence and viability of bona fide and law-abiding participants, sterilising this component of the supply chain, which was made up of about 350 000 waste pickers, according to the dtic.

“[It would] lead to economic devastation/welfare ruin and enhanced poverty for these operators and all those many millions of our people who rely on them for economic support,” Monage said.

He said the vast majority of these waste pickers were not criminals dealing in stolen material but rather legitimate self-employed individuals who are trying to earn a lawful living collecting untainted scrap metal from legitimate sources and supplying it to registered dealers.

“These individuals from the informal sector, many of whom are unsophisticated and do not have the means, cannot be expected to establish bank accounts or put in place other costly and sophisticated mechanisms/channels for the receipt of funds electronically,” Monage said.

He said that the major contributing factor, by far, to the damage to infrastructure stemmed from the procurement and trade in tainted copper.

“We believe the aim of the draft policy on measures to limit damage to infrastructure and the economy will still be met, and will not be undermined, if allowance is made for this segment of the supply chain to be paid in cash for all scrap and waste metal other than copper scrap and waste, and to be paid in cash for copper scrap and waste but limited to R10 000 per transaction,” Monage said.

He asserted that it would be “very unwise” to eliminate this part of the supply chain, which represented the foundation of most local recycling activities.     

“We believe further constructive and meaningful engagement with the [Trade, Industry and Competition] Minister [Parks Tau] and industry stakeholders must take place to find a path for greater self–regulation and pave the way for a lasting solution to eliminate theft and damage to infrastructure in a manner that is workable for all players so as to avoid the unintended consequences that some of the draft policy regulations will yield,” Monage said.

He added that rigorous and ineffective regulation yielding unintended consequences would not be a desired outcome for all legitimate participants in the sector and the economy as whole.