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The Citizen
08-08-2025
- Business
- The Citizen
Steel billet exports increase, scrap metal exports slump
This created arbitrage with an estimated value of R780 million for exporters. Policy interventions in the scrap metal market have created arbitrage between the price preference system (PPS) discount and the export duty on scrap metal products. A recent study (XA's Scrap Metal Report 2.1) by XA Global Trade Advisors (XAGTA) on the impact of these policy interventions on waste pickers showed that the export of 400 000 tons of steel billets (to circumvent the export duty) resulted in an arbitrage of R780 million. Arbitrage refers to taking advantage of price differences in different markets to make a profit. The first policy intervention was introduced in 2013 by way of the PPS. Scrap metal dealers can only obtain an export permit for their product once they have offered it at a 30% discount to local buyers such as the mini mills. Only then are they allowed to export the scrap, but it comes with a 20% export duty. There has been a noticeable increase in the export of steel billets and a decline in raw scrap metal exports. ALSO READ: US tariff an existential threat for a third of metals and engineering sector Incentivising arbitrage Donald MacKay, CEO of XAGTA, explains that mini mills get their raw material at a discount (PPS), melt it into steel billets (that are not a usable product such as rebar) and export the billet duty free. Source: XAGTA 'We have ended up rewarding the companies that are involved in these exports with R779.9 million … I don't think we should be incentivising scrap metal arbitrage,' says MacKay. 'The intention certainly was never to create the arbitrage, but the effect has been arbitrage. I don't think it is a healthy situation.' In theory it would be easy to correct the arbitrage created in the scrap metal industry, but in practice, this isn't the case. 'The reason for the arbitrage, in my view, is that there is too much money entering the sector that has no natural demand.' The easiest to prevent the arbitrage is for the Industrial Development Corporation to stop funding new mini mill operations, says MacKay. 'I am not saying they should pull their funding from existing operations, but you must stop putting more money into this space when there is no demand.' ALSO READ: A brighter future for South African steel? The trigger XAGTA has been keeping a close eye on the sale of scrap metal globally and in South African for several years. A statement by Neva Makgetla, chief economist at Trade and Industrial Policy Strategies (Tips), triggered their recent study. Makgetla is quoted as saying that the impact of the interventions on waste pickers is minimal, as they are not selling the kind of metal that the mini mills are consuming. According to the International Alliance of Waste Pickers, the informal recycling sector in South Africa consists of between 60 000 to 90 000 waste pickers. Many are migrants who move from rural to urban and peri-urban areas to find employment opportunities. According to a survey conducted by the University of Johannesburg, more than 70% of respondents earn less than R600 per week. The majority (39%) earn between R300 and R600 per week. They are not officially employed by either government or the private sector, yet according to the Council for Scientific and Industrial Research, informal pickers saved municipalities between R309 million and R748 million in landfill airspace in 2014 alone by simply diverting recyclables from them. MacKay says that, from its conversations with waste pickers, it is evident that the bulk of the volume they collect is paper, glass and plastic. However, the bulk of the value tends to come from metal. ALSO READ: Government called to take the lead in restoring the steel industry Policy matters XAGTA asked recyclers what the biggest risk to their scrap yards was. Their answer: interventions by government in the form of policy changes that keep the price of scrap metal artificially low. 'That was quite surprising because one would have thought theft at their premises would be a larger risk,' says MacKay. He adds that although the XAGTA advisors are not crime experts and there is a lack of sufficient data, they could not find a correlation between the imposition of PPS, export duties, or export bans on the theft statistics. However, the policy interventions are not yielding good outcomes for the country, particularly not for the poor and most vulnerable people. He would like to see them go but if they are not scrapped, he believes they should at least be lowered to something 'less predatory'. 'If we get what was promised, which was to replace PPS with the export duty, it would lessen the amount of heat in this space,' says MacKay. The International Trade Administration Commission is reviewing the PPS, and the findings are expected to be released later this year. This article was republished from Moneyweb. Read the original here.
eNCA
07-08-2025
- Business
- eNCA
US Trade Policy Risks Long-Term Isolation, Expert Warns
The United States' increasingly aggressive trade posture under successive administrations may leave lasting scars on global trade relations, potentially isolating the world's largest economy. That's the view of global trade expert Donald Mackay, who warns that the ripple effects of punitive tariffs could take decades to repair. Speaking to eNCA, Mackay, Director at XA Global Trade Advisors, said that over the past few years, the US has systematically alienated many of its trading partners. 'What the US has done is effectively 'Brexiteered' itself from much of the world. There are very few countries it hasn't managed to antagonise,' he said. Mackay cautioned that this trend is driving other nations to forge new trade alliances, shift investment strategies, and reduce their reliance on the US. While the full impact will take time to unfold, he believes the long-term consequences could see the US increasingly isolated in the global economy. Tariffs Likely Here to Stay While the upcoming US election may introduce political change, Mackay doubts it will lead to a major reversal in trade policy—regardless of who takes the White House. He pointed to recent history for context: 'President Trump imposed a 25% tariff on steel and aluminum in his first term. When President Biden took over, he left those tariffs in place. In fact, the Biden administration went further—introducing a 100% tariff on Chinese electric vehicles and launching the Inflation Reduction Act, which is the world's largest subsidy programme.' According to Mackay, both Democrats and Republicans appear aligned in their more protectionist approach, making it unlikely that tariffs will be significantly rolled back in the near future. Finding New Markets Not So Simple For countries like South Africa that have traditionally depended on US markets, the outlook is fraught with uncertainty. 'Finding new markets is not just about geography, it's about margin,' Mackay explained. 'You have to find a buyer willing to pay what you were earning in the US. And even if you do, you'll face pushback from local competitors in that new market.' He added that navigating new regulatory environments, building distribution networks, and understanding consumer preferences also complicate the process. 'These are not impossible problems, but none of them are easy,' he said. With global trade at a crossroads, analysts warn that volatility will remain a defining feature of the economic landscape in the years ahead.
IOL News
07-07-2025
- Business
- IOL News
SA Revenue Service imposes new excise duty on vaping liquid
A news customs duty has been slapped on vaping liquid, which will result in higher prices. On Friday the South African Revenue Service (SARS) introduced important amendments to the Customs and Excise Act, 1964, aimed at tightening the regulation of electronic cigarettes and vaping products. These changes, reflected in amendments to Schedule No. 1 (Parts 1 and 2A) and Schedule No. 6 (Part 1E), include the insertion of new tariff subheadings, the introduction of an excise duty on vaping liquid, and the implementation of new rebate provisions for defective or exported products. XA Global Trade Advisors explained that under the amended tariff structure, a new subheading, 8543.40.10, has been inserted to specifically classify vaping devices presented with vaping liquid, whether or not the liquid contains nicotine. The customs duty applicable to this subheading is currently set at free for imports under the general rate and under all listed trade agreements. However, while the customs duty is zero, SA Revenue Service (Sars) has introduced a new excise duty under Tariff Item 116.10.10, applicable to vaping liquid contained within such devices. A rate of R3.18 per millilitre now applies, making it critical for importers and manufacturers to recalculate their pricing structures accordingly. To ensure clarity regarding how this duty applies, Note 5 was inserted into Section A of Part 2A of Schedule No. 1. This note explicitly states that the rate of excise duty listed (R3.18/ml) is only applicable to the liquid component of the vaping device, not the hardware itself. These changes collectively ensure that vaping devices with prefilled liquid are clearly classified and taxed in line with existing excise policies for tobacco and substitute products. XA Global Trade Advisors said in line with the above adjustments, Sars also introduced three new rebate provisions under Schedule No. 6: Rebate Items 622.24, 622.25, and 622.26. These items allow for full duty refunds on vaping devices that are returned due to manufacturing defects, post-manufacturing deterioration, or contamination, or where devices are exported directly from a licensed customs and excise warehouse. To qualify, importers or manufacturers must meet several requirements, including ensuring that returned products are in sealed wholesale packaging, accompanied by a credit note, and returned within 12 months of removal from the warehouse. Furthermore, any reprocessing or destruction of returned products must occur under Sars supervision, with accurate records maintained throughout. XA Global Trade Advisors said these regulatory changes reflect Sars's commitment to stricter excise compliance in the vaping sector and signal an alignment with the treatment of traditional tobacco products. Businesses dealing in electronic vaping devices, particularly those importing prefilled or disposable units, must ensure that they are properly licensed, registered under the correct rebate provisions, and compliant with the administrative requirements set out in the latest amendments. According to Statista, in South Africa, the revenue in the e-cigarettes market is projected to reach $690.4 million (R12.3 billion) in 2025. This market is expected to experience an annual growth rate of 2.44% (CAGR 2025-2030).
The Star
02-06-2025
- Business
- The Star
South Africa's steel and aluminium sectors brace for impact as US doubles tariff charges
Banele Ginindza | Published 3 hours ago South Africa must adapt to new challenges as US President Donald Trump announced a fresh round of import tariff hikes of up to 50% on steel and aluminium this week, compounding the effects of April's 25% increase, according to stakeholders and analysts. The local sector is still grappling with disrupted global supply chains, rising manufacturing costs, and reduced competitiveness for South African automotive products in the US market. Many South African businesses are now exploring alternative markets in Africa, Asia, Europe, and the Middle East to reduce reliance on the US. The announcement came as South Africa and other countries trading with the US benefited from a 90-day tariff suspension beyond the 10% base tariff, providing a window for strategic negotiations to safeguard key exports and explore new trade avenues during a recent meeting between President Cyril Ramaphosa and his US counterpart. Friday's decision to raise tariffs on imported steel and aluminium from 25% to 50% escalates Trump's global trade war, coming hours after he accused China of violating an agreement to mutually roll back levies and trade restrictions on critical minerals. The European Commission responded on Saturday, signaling readiness to retaliate against the US plan, raising the prospect of an escalating trade conflict between major economic powers. Donald MacKay, the founder and CEO of XA Global Trade Advisors, noted that while South Africa's steel exports to the US are limited, the impact will still be felt. 'Aluminium is exported in far greater volumes, but the US has limited aluminium production, so prices will likely rise. This isn't good, but it's not devastating either,' MacKay said. South Africa's aluminium sector had previously been exempted from emergency tariff decisions due to the commodity's scarcity status. Muzi Manzini, the CEO of the Aluminium Federation of South Africa, expressed optimism about a potential deal involving South Africa purchasing US liquefied natural gas for a minimum of 10 years in exchange for steel and aluminium tariff exemptions. 'Unless we're back to the US's haphazard tariff policy, the trade court's ruling that the President lacks authority to impose tariffs may hold, despite the appeal. If this stifles Trump's tariff plans, we could revert to rules-based World Trade Organisation processes,' Manzini said. According to a PricewaterhouseCoopers (PwC) report, US Tariffs vs South Africa: A New Economic Era? , published on Friday, the tariffs have disrupted trade volumes and supply chains, reducing South African exports to the US due to higher costs. In response, businesses are leveraging the African Continental Free Trade Area (AfCFTA) agreement to boost intra-African trade and regional economic integration while prioritizing the transformation of raw materials into higher-value finished goods to mitigate tariff exposure and drive innovation. The report highlights that the tariffs will likely impact key export sectors, particularly agriculture and automotive, which are critical for revenue and youth employment. As the US is South Africa's second-largest bilateral trading partner, these changes could lead to reduced exports, lower selling prices to offset higher US landed costs, and potential job losses as US buyers turn to alternative sources. Despite these challenges, PwC notes that free trade agreements like the African Growth and Opportunity Act (Agoa) and AfCFTA offer significant opportunities. 'Although Agoa's future remains uncertain, it continues to be a valuable tool for South African exporters to maintain competitiveness in the US market,' the report stated.
IOL News
02-06-2025
- Business
- IOL News
South Africa's steel and aluminium sectors brace for impact as US doubles tariff charges
South Africa will need to adapt to new challenges after US President Donald Trump announced a fresh round of import tariff hikes of up to 50% on steel and aluminium this week. Image: Supplied South Africa must adapt to new challenges as US President Donald Trump announced a fresh round of import tariff hikes of up to 50% on steel and aluminium this week, compounding the effects of April's 25% increase, according to stakeholders and analysts. The local sector is still grappling with disrupted global supply chains, rising manufacturing costs, and reduced competitiveness for South African automotive products in the US market. Many South African businesses are now exploring alternative markets in Africa, Asia, Europe, and the Middle East to reduce reliance on the US. The announcement came as South Africa and other countries trading with the US benefited from a 90-day tariff suspension beyond the 10% base tariff, providing a window for strategic negotiations to safeguard key exports and explore new trade avenues during a recent meeting between President Cyril Ramaphosa and his US counterpart. Friday's decision to raise tariffs on imported steel and aluminium from 25% to 50% escalates Trump's global trade war, coming hours after he accused China of violating an agreement to mutually roll back levies and trade restrictions on critical minerals. The European Commission responded on Saturday, signaling readiness to retaliate against the US plan, raising the prospect of an escalating trade conflict between major economic powers. Donald MacKay, the founder and CEO of XA Global Trade Advisors, noted that while South Africa's steel exports to the US are limited, the impact will still be felt. 'Aluminium is exported in far greater volumes, but the US has limited aluminium production, so prices will likely rise. This isn't good, but it's not devastating either,' MacKay said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Muzi Manzini, the CEO of the Aluminium Federation of South Africa, expressed optimism about a potential deal involving South Africa purchasing US liquefied natural gas for a minimum of 10 years in exchange for steel and aluminium tariff exemptions. 'Unless we're back to the US's haphazard tariff policy, the trade court's ruling that the President lacks authority to impose tariffs may hold, despite the appeal. If this stifles Trump's tariff plans, we could revert to rules-based World Trade Organisation processes,' Manzini said. According to a PricewaterhouseCoopers (PwC) report, US Tariffs vs South Africa: A New Economic Era?, published on Friday, the tariffs have disrupted trade volumes and supply chains, reducing South African exports to the US due to higher costs. In response, businesses are leveraging the African Continental Free Trade Area (AfCFTA) agreement to boost intra-African trade and regional economic integration while prioritizing the transformation of raw materials into higher-value finished goods to mitigate tariff exposure and drive innovation. The report highlights that the tariffs will likely impact key export sectors, particularly agriculture and automotive, which are critical for revenue and youth employment. As the US is South Africa's second-largest bilateral trading partner, these changes could lead to reduced exports, lower selling prices to offset higher US landed costs, and potential job losses as US buyers turn to alternative sources. Despite these challenges, PwC notes that free trade agreements like the African Growth and Opportunity Act (Agoa) and AfCFTA offer significant opportunities. 'Although Agoa's future remains uncertain, it continues to be a valuable tool for South African exporters to maintain competitiveness in the US market,' the report stated.
