Trade and Industry Minister Rob Davies. Picture: SOWETAN
Trade and Industry Minister Rob Davies. Picture: SOWETAN

THE Metal Recyclers Association of South Africa (MRA) says the Treasury is not in favour of the government imposing a surcharge on scrap metal exports.

This comes as Cabinet this month adopted measures to pass on "iron-ore price concessions" to downstream steel users.

These include controlling the export of scrap metal, fast-tracking amendments to the Mineral and Petroleum Resources Development Act, and amending the Competition Act.

"We understand the Treasury is not in favour of a surcharge on the exportation of scrap metal," Bernard Maguire, executive member of the MRA, said on Wednesday.

He said MRA chairman Mike Wilson was told by Mark Krieg, executive director of the Aluminium Federation of South Africa (Afsa), that the Treasury was opposed to an export tariff on scrap metal.

But Afsa itself was in favour of an export tariff on scrap metal, having long complained that as a downstream user it paid among the world’s highest prices for South Africa’s scrap.

The Department of Trade and Industry this month said a "developmental steel price" was a "significant lever" to attract foreign direct investment into strategic manufacturing sectors in the country.

But the Treasury’s stance may complicate this. In a presentation to the National Economic Development and Labour Council in October, it concluded that export taxes could have "negative economic impacts".

It said the government needed "to be clear" on the trade-offs involved, and the impact "thereof on jobs, inequality and growth".

"Export taxes can be a blunt instrument. Often, there exists other policy instruments that can outperform an export tax, suggesting the need for thorough analysis," it said.

Crucially, the Treasury also said South Africa’s trade agreements, including those with the European Union and the Southern African Development Community, both prohibit and limit the use of export taxes.

In 2002, the government broke up former state-owned steel maker Iscor. Anglo American’s Kumba Iron Ore took its iron ore assets, while South Africa’s primary steel maker, ArcelorMittal South Africa, gained access to significant volumes of iron ore at cost plus 3%.

But since then the government had said ArcelorMittal South Africa did not pass the benefits of cheaper ore on to downstream manufacturers.

The state’s subsequent interventions in this regard had led to the breakdown of the cost plus 3% pricing arrangement, and the matter was now the subject of various legal disputes.

This month, Kumba and ArcelorMittal South Africa struck an interim pricing agreement that Kumba would supply a maximum 4.8-million tons a year of iron ore to the steel maker at an average $65 per ton, for one year.

But Trade and Industry Minister Rob Davies subsequently said he "noted with considerable concern" the agreement did not ensure a discounted iron ore price would be passed on as a "developmental steel price" to the manufacturing sector.