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Export Tax on Scrap Metal on Track

July 31, 2020

Department of Trade, Industry and Competition

Implementation modalities on the proposed export tax on scrap metal are being finalised.

The trade, industry and competition department confirmed this in a briefing in parliament on Developments in the Steel and Sugar Industries.

National treasury sought comment on the proposal to introduce export taxes on scrap metal in March 2020.

In the 2020 Budget Review, treasury announced that it will commence consultations with affected industries on the introduction of export taxes on scrap metal.

A price preference system (PPS) for scrap metal is currently in place.

In October 2019 the International Trade Administration Commission (ITAC) sought comment on the proposed export duties on ferrous and non-ferrous waste and scrap.

Proposed export duties include R1000 per ton on ferrous (including stainless steel); R3000 per ton on aluminium and R 8 426 on red metals.

According to the comment notice, the trade and industry minister, Ebrahim Patel, had directed ITAC to investigate and advise on whether it would be appropriate to replace the existing PPS regulating the exportation of ferrous and non-ferrous waste and scrap metal with an export duty on scrap metal.

The PPS was introduced in September 2013 for an initial period of five years and extended twice, firstly until 30 June 2019 and, secondly, until 31 March 2020.

The Policy Directive was extended by nine months from 1 April 2020 until 31 December 2020 to enable treasury and the trade and industry and economic development departments to finalise the implementation of an export tax.

According to the treasury statement, ITAC submitted recommendations on the proposal flowing from a feasibility study.

Treasury pointed out that the envisaged consultation will take place in two phases.

“The first phase will be a shorter and broader public comment process on the objective, implementation, functioning and economic and financial impact of such an export tax, including the level of rates and base for such a tax.”

The second phase will focus on the proposed legislative provisions to give effect to specific export taxes on scrap metal to be included in the 2020 Draft Taxation Laws Amendment Bill.

Earlier this month, the trade, industry and competition minister called on the ITAC to urgently investigate whether the Policy Directive on scrap metal is continuing to meet its objectives.

In the directive, ITAC has also been instructed to determine whether there is a “shortage of scrap metal for the domestic processing industry, whether the discount, delivery and payment terms should be amended and whether another formula should be applied to achieve the objectives”.

ITAC must complete the investigation within two months.

In the interim, no ferrous and non-ferrous waste and scrap of any kind may be exported during the investigation unless ITAC determines that it will not be used by the domestic processing industry.

However, existing export permits or applications made before the date of publication of the notice will not be affected.

In the briefing, the department confirmed that the first phase on the proposed export tax on scrap metal was delayed due to the COVID-19 pandemic.

The department also pointed out that the process to develop the Steel and Metal Fabrication Sector Master Plan is well underway with Phase 1 to be completed within the current financial year.

As regards the sugar sector, the department reminded members that amendments to the Sugar Industry Agreement and South African Sugar Association Constitution were gazetted on 23 June 2020, providing for a new transitional period from 1 July 2020 until 31 March 2024 or any later date determined in terms of clause 15(5).

The Sugar Masterplan has been drawn up and a “phased implementation approach has been agreed upon to ensure agility and speed to implementation and alignment to market condition”.

The sign off event will be organized following the lifting of the COVID 19 Lockdown and 7 Task Teams will be established.

The Competition Commission Exemption Framework necessary for the implementation of the term diversification strategy is to be finalized and gazetted.

Meanwhile, in a statement on the recently released B-BBEE Commission National Status and Trends on BBBEE Report, the B-BBEE Commissioner, Zodwa Ntuli, indicated that the B-BBEE Commission will proceed to engage other regulators to enforce the implementation of sections 10 (1) and 13G of the B-BBEE Act.

This will include referral of non-compliant entities for prosecution via the National Prosecuting Authority.

“The B-BBEE Commission will also strengthen the engagement with the JSE to enhance submission of compliance reports as this is a listing requirement on the stock exchange, and the Auditor-General to tighten the reporting requirements for organs of state and public entities.”

The Commissioner highlighted during a webinar that “economic transformation remains too stagnant to create an inclusive economy, making the attainment of Vision 2030 of the National Development Plan (NDP) impractical”.