On 12 July 2024 the Civilian Secretariat for the Police Service published an invitation for public comments to proposed amendments to the Regulations to the Second-Hand Goods Act.
The Steel and Engineering Industries Federation of South Africa (SEIFSA) represents 18 Employer Organisations, who collectively represent in excess of 1300 companies and employ approximately 170 000 employees in the sector. The federation’s affiliated membership constitutes the entire metals value chain from metal production, merchants, metal fabrication, heavy and light engineering.
SEIFSA will be providing detailed comments in due course but wishes to provide its opinion on two main and critical issues and themes which emerge from the proposed amendments. We believe there is not proportionate nor appropriate industry regulation to achieve the desired ends and minimize resultant harm. Further, it will have severe unintended consequences. It will offer no further assistance to Government to achieve the aims and objectives of the draft policy on measures, to restrict and regulate trade in ferrous and non-ferrous metals waste, scrap and semi-finished ferrous and non-ferrous metal products to limit damage to infrastructure and the economy.
Enhanced Reporting Requirements
The proposed amendments envisage an enhanced reporting system which will require the submission of monthly electronic reports via the Metal Trading System (MTS) showing all purchases and sales of metal products. Whilst 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. Its attempted introduction under the guise of an amendment to the Regulations of the Second-Hand Goods Act is not action in good faith.
There are a number of critical concerns regarding the proposed MTS and required information disclosure. First, we believe it will render the required information disclosure open to legal challenge and review on the grounds of it being disproportionate, ineffective and not a rational modus/response for solving the mischief that it is intended to curb.
Secondly, we raise serious issues of disclosure and abuse of confidential and proprietary information of which concern has been exacerbated by the security breach suffered by DTIC on 2 January 2024.
The measures will not assist the authorities, as those involved in illicit trade will likely 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, illegal activity and criminality in the 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.
This raises grave concerns over the disclosure of proprietary information and possible abuse of such information by individuals from government departments and law enforcement agencies, who have been accused of alleged involvement in criminal activities but have yet to be removed from their positions of authority.
Elimination of cash for all transactions
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, many of whom comprise a large segment of the supply/value chain.
The proposed blanket prohibition will threaten the very existence and viability of these bona fide and law-abiding participants, ultimately sterilising this critical component of the supply chain (approximately 350Â 000 waste pickers per DTIC published figure). This could lead to economic devastation/welfare ruin and enhanced poverty for these operators and those of our people who rely on them for economic support.
The vast majority of these waste pickers are not criminals dealing in stolen material, but rather self-employed individuals desperately trying to eke out a lawful living by collecting untainted scrap metal from legitimate sources and supplying it to registered dealers. These individuals from the informal sector, many of whom do not have the means, and cannot be expected to establish bank accounts.
The major contributing factor to the damage of infrastructure stems from the procurement and trade in tainted copper. We believe the aim of the draft policy 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. Additionally, to be paid in cash for copper scrap and waste but limited to R10 000 per transaction. We believe that it would be unwise to eliminate this critical and crucial part of the supply chain which represents the very foundation of most recycling activities.
Next Steps
We believe further constructive and meaningful engagement with the Minister and industry stakeholders must take place to find a path for greater self–regulation. This would pave the way for a lasting solution to eliminate theft and damage to infrastructure, in a manner that is workable for all players, avoiding the unintended consequences that some of the draft policy regulations will yield.
Rigorous and ineffective regulation yielding unintended consequences is not a desired outcome for all bona fide participants in the sector and the economy of South Africa as whole.
Elias Monage is the President of the Steel and Engineering Industries Federation of Southern Africa.
