Cashless Scrap Metal Payments and VAT264: What Recyclers Need to Know

Cash has long been how South African scrap yards pay sellers at the counter. That is changing. Proposed amendments to the Second-Hand Goods Act would require recyclers to pay for controlled metals electronically, and the paperwork that lets a recycler reclaim VAT on purchases from non-vendors — the VAT264 declaration — already depends on proof of payment. This article sets out, as precisely as we can, what is law today, what is only proposed, and what a well-run yard should be doing now.

1. What the law says today

The Second-Hand Goods Act, 2009 (Act No. 6 of 2009) regulates dealers and recyclers. As currently in force, it does not prohibit paying sellers in cash. What it does require is strict record-keeping for every transaction: under section 21 you must record the seller’s identity and how it was verified, a description of the goods, the purchase price, the staff member who did the deal and the date and time — and keep a copy of the seller’s ID, all for at least five years. Recyclers of controlled metals must also be registered as recyclers under section 25. (Our Second-Hand Goods Act compliance guide covers these obligations in full.)

Schedule 2 of the Act defines the controlled metals: copper, aluminium, zinc, chrome, lead, white metal, nickel, tungsten, tin, ferrovanadium, ferrosilicon, ferrochrome, brass, bronze, cobalt and precious metals, or articles consisting wholly or principally of them.

2. What is proposed: the 2026 Second-Hand Goods Act amendments

In early October 2026 the Civilian Secretariat for Police Service published proposed amendments to the Second-Hand Goods Act for public comment. Cabinet had approved the draft for public comment in August 2026, and the comment period closes on 2 November 2026. As reported, the key proposals include:

• Electronic payment for controlled metal. The draft provides that “a recycler must, when concluding any transaction with a person to acquire controlled metal, pay such a person by way of an electronic payment” — in effect, ending cash buying of copper, aluminium, brass and the other controlled metals.
• Tighter seller records, including reported requirements to record the names and ID numbers of informal collectors such as waste pickers.
• Precious metals brought more firmly into scope, with additional obligations on jewellers.
• Licensing restrictions, reportedly disqualifying foreign nationals without verified permanent residency from obtaining a trading licence.

The policy driver is infrastructure theft — reported to cost the economy around R45 billion a year — and the cash economy that makes stolen cable easy to sell.

What this means today: nothing changes legally until the amendments are finalised, passed by Parliament and brought into operation, and the final text may differ from the draft. But the direction of travel is clear, and the change, when it comes, is likely to arrive with a short runway. Yards that already pay electronically will not need to change anything.

3. Other moves towards cashless scrap

• Exports and the price preference system. Since 2013, exports of scrap metal have been subject to a price preference system administered by the International Trade Administration Commission (ITAC). In November 2025 it was reported that ITAC’s review of that system had advanced measures to prohibit cash dealings in the trade of scrap steel requiring export authorisation, with transactions to run through the national payment system. If you export or supply exporters, check the current permit conditions with ITAC or your association.
• Human rights and infrastructure pressure. In September 2026 the South African Human Rights Commission was reported to be calling for scrap dealers to move to cashless transactions for copper, citing the impact of cable theft on communities’ access to electricity, water and transport.
• Buyer and bank expectations. Large mills, exporters and banks increasingly expect traceable payments and verified supplier records as part of anti-money-laundering and responsible-sourcing checks.

4. VAT264 and notional input tax, explained

When a VAT-registered recycler buys scrap from a seller who is not a VAT vendor — an individual collector, a non-registered contractor — there is no tax invoice and no VAT charged. The VAT Act still allows the buyer to claim notional input tax on second-hand goods acquired from a South African resident who is not a vendor, provided strict documentary requirements are met. For many recyclers this is a material part of their margin.

SARS’ VAT264 “Declaration for the supply of second-hand goods” is the document that supports the claim. It was updated on 30 March 2023 to align with VAT amendments. It must be completed for each supply and kept by the vendor claiming the deduction, and it captures:

• Owner details — full names, ID number (individual) or registration number (company, CC, trust), address, and the name and ID of anyone representing the owner.
• Attachments — a copy of the owner’s ID document (individual) or letterhead/official document (entity). If these are not attached, notional input tax cannot be deducted.
• VAT status — whether the owner is VAT-registered and whether the supply is a taxable supply. If it is taxable, you cannot claim notional input tax; you need a valid tax invoice instead.
• The goods — description and quantity/volume/mass (and vehicle details where relevant).
• Payment — selling price, payment reference number and date of payment.
• A signed declaration by the owner or their authorised representative.

Three limits on the claim matter most in a scrap yard:

1. The information required by section 20(8) of the VAT Act must be obtained and attached.
2. Notional input tax is limited to the lesser of the amount paid or the open market value of the goods.
3. If the price has not been paid in full, the claim is limited to the extent of payment actually made.

Note that goods made from gold and other valuable or precious metals have their own VAT rules — they are generally excluded from notional input tax unless resold in substantially the same state, and a domestic reverse-charge mechanism applies to certain valuable-metal supplies. Take specific advice if you handle them.

5. Worked example

A VAT-registered recycler buys copper cable offcuts from a non-vendor contractor for R11,500, paid in full by EFT. The VAT264 is completed with the contractor’s details, ID copy and the EFT reference.

Across a yard buying R2 million a month from non-vendors, the same calculation is worth about R260,000 a month in input tax. Every purchase with a missing ID copy, a missing declaration or an unproven payment is a claim at risk in a SARS audit — and the risk compounds, because records generally have to be kept for five years under the Tax Administration Act.

6. Why cashless makes VAT264 easier

The VAT264 asks for a payment reference number and date of payment, and the claim is limited to the extent of payment made. A cash slip signed at the counter is weak evidence; an EFT with a bank reference tied to the transaction is strong evidence. Moving to electronic payment therefore does three jobs at once:

• it puts you ahead of the proposed Second-Hand Goods Act rule;
• it strengthens every notional input tax claim; and
• it removes the cash-in-transit, vault and theft risk of holding large amounts of cash on site.

The catch is operational: EFT must be fast enough that sellers don’t walk to the yard down the road that still pays cash, and every payment must be matched to the right weighbridge ticket, register entry and VAT264. That is a systems problem, not a banking one.

7. A practical transition plan

1. Register sellers once. Capture ID, address, phone, bank details and VAT status at the first visit, verify them, and reuse the record on every return visit.
2. Make the weighbridge ticket the anchor. Gross, tare and net by grade, priced from the day’s rate card, creates the purchase — and the SHGA register entry and VAT264 data at the same time.
3. Pay from the ticket. Release EFT against the approved ticket and store the bank reference and proof of payment on it.
4. Run cash and EFT side by side — for now. If you still pay some sellers in cash, manage the vault and teller sessions tightly so every rand is reconciled to a ticket, and set a target date to finish the switch.
5. Reconcile daily. Payments against tickets, tickets against stock by grade, and VAT264 completeness before the period closes.
6. Prepare for inspection and audit. Be able to export the SHGA register for SAPS and the VAT264 pack for SARS for any date range.

How SynchPlus ONE helps

SynchPlus ONE for recyclers puts intake, grading, payment and compliance on one material ledger:

• Weighbridge intake by grade with draft tickets reviewed before posting to stock, and dated buy and sell prices per grade.
• Cashless / EFT settlement with proof of payment — built for the scrap cash ban — on the purchase it pays.
• VAT264 notional input VAT captured on buys from non-vendors, with supplier purchase invoices against intake and bulk-receipt import for high-volume buying.
• SHGA register on every scrap acquisition: seller ID captured and POPIA-encrypted, the section 23 holding period enforced, and one-click SAPS Annexure B export.
• Cash and vault management with teller sessions for yards still transitioning from cash.
• Mass-balance from weighbridge to buyer, so purchases, stock and sales reconcile by tonnage.

It runs on-premise at the yard even where connectivity is poor — or in our cloud — in any country, with the South African compliance layer switched on for local yards. See also scrap yard management, weighbridge software and pricing.

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