Container ships sit to load and offload goods in port during a 21 day nationwide lockdown aimed at limiting the spread of coronavirus disease COVID 19 in Cape Town, South Africa, April 17, 2020. REUTERS Mike Hutchings Mike Hutchings:
Oct 15 Reuters - South Africa's economic woes are being compounded by the theft of massive amounts of copper from State firms Eskom and Transnet, much of which is stolen overseas, costing the country billions of rand a year, according to market sources.
Covey – 21 said that "copper thefts have risen 177% over the past five years" and had heightened particularly sharply during the TRANSAT Freight Rail pandemic.
In 2020, hundreds of thousands of metres of cables were stolen and about 20 trains were cancelled a day, according to the company, which said it had been forced to hire security drones and helicopters to stop criminal gangs.
The cumulative damage of copper cable theft to the economy, Transnet, and general public is staggering, it said.
The commercial power cuts disclosed by Eskom and Transnet alone represent a significant blow to South Africa, where frequent rolling power cuts have dampened growth and stifled investor confidence.
While copper theft is not a new phenomenon, state companies and business players in South Africa say it has surged in recent years. The demand for copper scrap has been boosted by low supplies and tight inventories, pushing prices to record highs.
Some South African scrap dealers buy stolen copper, melt it down, turn it into ingots and granules, which do not require scrap export permits or remove identifying markers, four sources on local manufacturing and recycling companies told Reuters.
Three sources said smugglers typically sent scrap to Asian markets, often using export codes for shoes or textiles to avoid detection.
There is almost no way to determine where scrap has come from once it's been shredded or granulated as the processing machinery damages any identifying marks on metal surfaces said Ross Bartley, head of trade and environment at Bureau of International Recycling BIR. Previously unreported government data from confidential reports compiled for the scrap industry shows how the South African market has morphed
ITAC, government agency responsible for export permits, granted copper export permits for 9,956 tonnes of scrap in 2019 a fraction of the 122,817 tonnes in 2012.
Six scrap and manufacturing sources said the scrap was left in mislabelled forms or in more processed form when the country was leaving the country. However ITAC said the decline in permits was largely down to more scrap deals being agreed domestically under the country's Price Preference System PPS than a surge in smuggling.
The PPS, introduced in 2013 forced scrap exporters to drop dumping and imports to at a discounted rate for local manufacturers material.
Yet the industry sources said this had not significantly helped as the domestic prices for scrap were usually far lower than the profits to be gained if scrap is sold abroad or smuggled on by other means.
The spokesperson for the South African Revenue ServiceAfrican Revenue Service declined to comment on how much the stolen scrap metal was costing the country.
Evert Swanepoel, chairman of the Copper Development Association Africa CDAA representing manufacturers that use copper scrap, said that illicit market was driving law-abiding firms out of business.
The CDAA's membership has almost halved in the last four years and thousands of jobs have been lost due to manufacturers not being able to access the scrap they need as a basic material for manufacturing.
If we don't do something soon then the industry is doomed. In August, the government added an export levy on PPS to encourage more high quality scrap to stay in the country.
Donald MacKay, director of XA International Trade Advisors, estimated that this added approximately 300 million Euro a year in costs for legitimate scrap exporters.
There is serious concern in the scrap industry over this, said MacKay, who advises exporters on trade laws. Criminals who illegally trade scrap metal are going to have a conscience when they need to make an export declaration.