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PPS TO BE IMPLEMENTED ON TOP OF EXPORT DUTIES ON SCRAP METAL

By Donald MacKay | Jul 28, 2021

There is nothing good about this. The Price Preference System (PPS), forces a discount into the sale of scrap metal when sold locally and now the export duty will levy a large tax on the export of scrap. It is not clear how the recycling sector is to generate a profit.

The extension of the PPS by 2 years is a decision made in bad faith. There have been repeated announcements that the PPS would be replaced by export duties and now when the export duties are about to be imposed the story is changed and PPS will be added on top of the export duties.

The gazette announcing the extension of PPS speaks of “complement[ing] and supporting the the operation of the export tax on ferrous and non-ferrous waste scrap and metal”. Like this is a wonderful thing, yet the very decision to extend the PPS is based on a severely compromised process.

Minister Patel was advised by a ‘working group’, which was formed as part of the Steel and Metal Fabrication Fabrication Masterplan (the “Masterplan”). The Minister will not disclose their identities, but presumably they come from the steel industry. We have no idea how the secret ‘working group’ can provide advice on the non-ferrous sector, when that sector is presumably not represented on the Steel Masterplan Committee. Certainly no mention is made in the Masterplan about any of the other metals, so it’s not clear at all how the steel sector provides policy input for the non-ferrous sector.

Is there a reason why the identities of the ‘working group’ are kept secret? Presumably they stand to benefit from the decision taken, but we have no idea who they are, and so can’t determine if this process is compromised or not. For an industry with a shaky relationship with the Competition authorities, its not clear how they will justify having access to information which allowed them to advise the Minister, when their suppliers and competitors are denied this same information.

The Masterplan contains large, glaring errors relating to the recycling sector, the most obvious being the calculation of the demand by the mini mills. Included in the table identifying the demand is Cisco, a company currently in business rescue. A company funded by the IDC to the tune of R450m, at a time when their auditors identified them as being insolvent. The same company Minister Patel cut the ribbon on when they reopened in 2018. It is not clear at all if the IDC will recover any of that money, but it is definitely clear that they are not producing.

Industrial policy formulated in secret is a problem. I don’t like it. It is a compromised process that is more likely to lead to bad outcomes rather than good.

If you are not alarmed at what happened here, you should be. Take a moment. Think. Be alarmed and then contact us at info@xa.co.za. or partners@sideraconsult.comThese are the kinds of problems XA knows how to solve.

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