Fixing the scrap metal problem

2012-06-04 00:00

THE scrap-metal recycling industry is potentially very harmful when not properly controlled. Of course, there must be some honest scrap-metal dealers out there who do not melt down manhole covers, copper telephone wire and the like. It is certain, however, that criminals would not bother stealing metal infrastructure with such monotonous regularity, if they were unable to offload their swag in exchange for cash, with relative ease.

Scrap-metal dealers are currently subject to a form of regulatory control and licensing (the Second-Hand Goods Act, 2009), but the system is not nearly rigorous enough to deal with the levels of criminality that it is fighting. I propose that a system even more rigorous and onerous than the licensing and regulatory regime applied to the gambling industry should be applied to the scrap-metal industry.

The basics of the gambling regulatory regime are limited entry into the market, only through licensing, special fees and taxes, specialised regulatory statutory bodies (gambling boards) to license operators and to police their compliance with laws and, lastly, strict regulation of the technology and (in some cases, such as with bookmakers) the record-keeping system, used by the industry.

What I envisage for the scrap-metal industry, is a system where every exchange of second-hand metal between seller and buyer, must take place on camera, and whereby all purchases and sales made by the scrap-metal dealer are recorded on a computer system, in a specified format (perhaps even using specified software), leaving an indelible electronic audit trail, which must match both the video record and actual stocks. Regulators would have 24-hour, remote, read-only access to the transaction recording system, via an Internet connection.

Anyone with any controlling or financial interest in the business, will be subject to a licensing process which will involve the exclusion of individuals and companies based on various criteria, such as criminal records and tax-law violations. In other words, the exclusions which exist in the Second-Hand Goods Act, 2009, must be beefed up and must be at least as strict and all-encompassing as those found in gambling laws. All bank accounts held by people with any controlling or financial interest in the business must be subject to scrutiny by the regulatory body and/or by SARS.

Due to the great differences in the developmental history between the gambling industry and the scrap-metal industry, there will have to be some fundamental differences in the regulatory regime applicable to the scrap-metal industry. Licences should not be limited in number or expensive to acquire. They should be easy to get and easy to lose.

A special tax, particularly a tax based on profit or turnover, is not necessarily desirable, but the industry must pay for its own regulation, perhaps through licence fees. If the annual licence-renewal fee is based on a percentage of profit or turnover, then SARS and/or a specialised regulatory authority for scrap-metal dealers, will have an interest in making certain that what is declared as profit or turnover is not an underdeclaration, thus adding another dimension of control. A specialised regulatory authority is a crucial component of this system.

Once an industry is controlled through a system of licensing, conditions of licence can be used to harness the industry for the public benefit, or least to offset the harm caused by it. By this, I mean that based on a percentage of profit or turnover of the business, each recycler must be required to undertake corporate social investment (CSI).

This CSI could be directed towards countering the negative impact of the theft of communications or municipal infrastructure, which the industry facilitates. Of course, CSI could otherwise be directed to any worthy social or economic development project or cause. This will tend to weed out quickly the hardened criminal elements from the metal recycling industry, who will try to avoid compliance with conditions of licence and so lose their licences.

Lastly, the theft and/or destruction of any communications, road, or municipal infrastructure, as well as any act of conspiracy aimed at the commission of such crime, should be made a statutory crime, to which a minimum sentencing regime is linked. Hopefully, recyclers with a modicum of social conscience will support these proposals and that policy makers will give them serious consideration.

• Barry Wilkinson is a deputy manager in the chief directorate: gaming and betting in the Office of the Premier: KwaZulu-Natal. He writes in his personal capacity

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