Nothing’s leaner than a junkyard, where rusted scrap is gold

June 25, 2014 Posted by admin

THE army of people sifting through rubbish bins, scouring garbage tips and going door to door in the hunt for scrap metal has created an efficient market for the feedstock of steel makers domestically and abroad, while creating a critical source of money for those on the fringes of society.

Scaw Metals, which is 74% owned by the Industrial Development Corporation, is one of the main beneficiaries of this constant stream of scrap steel to make a variety of products at its vast production facilities to the southeast of Johannesburg.

Scaw produces at least 500,000 tonnes a year of liquid steel, using scrapped metal for about 80% of its feedstock. South Africa produces about 3-million tonnes of ferrous scrap a year, with roughly half of that exported. Of the remaining 1.5-million tonnes, Scaw needs about a third.

It owns two businesses that secure 250,000 tonnes for its plants a year and it buys the rest from other scrap companies.

The scrap metal sector is an almost invisible economy to the bulk of South Africans, but to those involved it is an intensely competitive, efficient and important business, benefiting those right at the bottom, hauling their trolleys through the streets to the big steel makers that use this metal in their furnaces.

It is a business that puts food on the table. “It’s street gold. Scrap metal is gold on the streets and informal settlements, and an important part of people’s lives. Without it you would see much more poverty in the areas people live in,” says Jack Janse van Rensburg, the risk and commercial manager of Scaw’s scrap-processing division.

Scrap collectors with bakkies can earn R2,000 a day while those with trolleys can earn up to R500 a day, bringing in between 50kg and 200kg a visit, he says, adding that it is very difficult to trace illegal ferrous scrap compared with nonferrous scrap like copper, which has stricter legal procedures governing it.

“Any copper coming in without documents saying where it comes from is classified as illegal and we would not buy it. We would have to report it to various agencies,” he says.

The dealership would not buy any identifiable municipal property. “Seeing illegal scrap is a rarity because we’re a very well-known scrap buyer and dealer, and we have several processes in place to prevent these kinds of dealings,” he says.

One man, a regular client, collects enough cans in a week to raise the cash to feed his large family, and he’s a regular client at Inyoni Metal in Vosloorus, says director and head of business Khensane Mabange, himself a start-up entrepreneur in the scrap business.

Others use bakkies or small lorries to haul scrap to Inyoni’s dusty yard, where to the inexperienced eye scrap metal is scattered in meaningless piles. To the trained eye, however, it has been carefully sorted into different qualities of ferrous or iron-bearing scrap, fetching different prices in a volatile market.

Inyoni is extremely strict about the metal coming through its gates and does not take any risks on metal stolen from the state or the local community, he says. “I can’t risk paying R50 for a bit of metal that will end in our business being closed down.

“We don’t buy any stolen scrap. If guys bring it to us we bar them. It’s just not allowed,” Mr Mabange says, adding that Inyoni, a registered scrap merchant, collects copies of identity documents and cellphone numbers of sellers to closely monitor and track scrap deliveries.

The police regularly visit the yard, underpinning the need for integrity, he says, as three men arrive separately, one with an old oil heater, another with a washing machine balanced precariously on a wheelbarrow, and the third with a shopping trolley piled high with metal glinting in the highveld winter sun.

Mr Mabange’s father, who worked in human resources at Scaw, made the introduction for Khensane that led to him leaving his job as a sound engineer to start a scrap merchant business with just R5,000 in 2004. Scaw has donated a couple of computer-linked weigh bridges to quickly process scrap, and Inyoni is using its relationship with the steel maker to forge a collection business with engineering companies around Johannesburg, Mr Mabange says.

“There’s an amazing amount of scrap that comes out of the townships. People are selling all kinds of things, particularly at the end of the month to make money for rent and things,” says Makhosini Hlatshwayo, Inyoni’s financial director. “But you must know, if you can’t pay them immediately they won’t come back. The want cash in hand and if you can’t give it to them they’ll go to the next guy who can.”

At Rand Scrap Iron, owned by Scaw, bakkies and lorries piled high with scrap from as far afield as Bloemfontein and Limpopo queue at the gate, waiting to drive onto the weighbridge, dump their metal, drive over a second weigh bridge and then queue again for payment. Phillip Khoza says he can realise a profit of R1,000 a week for two loads. It means he can provide for his wife, child and extended family.

He rents a bakkie for R500 a load, which he and a friend collect from townships around Johannesburg, buying old fridges, washing machines and corrugated iron. “It’s very competitive. Scrap is becoming scarce. People are starting to demand a lot of money,” he says. “There is some fighting for scrap. People set their dogs on us, saying we are stealing scrap. That’s not true. We buy it.”

Quobekiye Sithole says he sometimes drives through the night after collecting scrap in the Free State, Mpumalanga or Limpopo, with the need for a rapid turnaround between collecting and securing payment a key aspect of his approach.

One observer says the reason many scrap collectors drive through the night is to avoid attention from the police as their vehicles are dangerously overloaded and barely roadworthy.

The scrap is delivered to Scaw’s yards at Union Junction, a sprawling site where the metal is melted and turned into a variety of products for the mining and construction sectors.

Piles of scrap are fed into an enormous shredder, the only one in South Africa, where 16 giant, hardened-steel hammers pulverise the scrap, which is then magnetically sorted into ferrous and nonferrous scrap. The end product is flakes of metals that are delivered to the furnaces. The shredder is so powerful that it can shred within 10 seconds a minibus taxi that has been squashed into a small block of metal. It processes up to 1,500 tonnes of scrap in an eight-hour day, with taxi scrap making up about 300 tonnes a month, says Mr Janse van Rensburg.

The cost of scrap now is about R3,000 a tonne, roughly R300 a tonne more than the price for most of last year and R1,000 more than five years ago, he says, adding that there is fierce competition for scrap, with a tenfold increase in dealers in the past three years, high international prices and strong outflows from South Africa. The informal sector contributes about 4,000 tonnes of the 40,000 tonnes a month of scrap that Scaw buys, he says. “The informal guys take out all the nonferrous metals and plastics. The informal sector is a very efficient system.”

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