File photo.

Cape Town - South African steel mills and foundries will be given priority to buy scrap metal which can only be exported if they are offered it at discount first, according to a draft policy aimed at protecting local industry.

This is one of a raft of proposals being pursued by the state to boost local production of steel and other industrial input materials, thereby limiting the country's reliance on imports as it seeks to spend 4 trillion rand ($449 billion) on new railways, roads and ports over the next two decades.

“A failure by local industry to respond sufficiently and timely to increased demand will lead to greater levels of imports. That would expose the infrastructure-build programme to import risks and currency fluctuations,” the draft policy from the ministry of economic development said.

“The ultimate goal is to ensure that there is a steady supply of quality scrap metal to local users at a price that is reasonable in order to support the local industry,” it said.

An increase in scrap metal exports has hit mini steel mills and other processors of scrap metal, which in turn has caused shortages of products supplied to the construction industry and could hurt the government's massive infrastructure programme.

Already ferrous and non-ferrous waste need an authorisation from trade regulator ITAC to be exported, but the new policy proposes that ITAC would only be allowed to issue export permits once the scrap had been offered to domestic users first.

A total of about 3.5 million tonnes of scrap metal is collected in South Africa each year, out of which at least 1.5 million tonnes is exported, according to the Metal Recyclers Association.

The draft policy, which excluded a total ban and tax on scrap metal exports, is still subject to comments and has to be ratified before becoming law. - Reuters