It is currently taking an average of 25 months for government to complete import duty investigations and to provide the necessary Ministerial approvals for the South African Revenue Service to implement duty increases or reductions, a new report shows.
Compiled by XA Global Trade Advisors, the analysis also highlights a marked slowdown in turnaround times over the past ten years, with the longest outstanding case in 2013 having been 17 months, which is eight months shorter than the current average turnaround time.
Import duty investigations are officially meant to be concluded within six months.
CEO Donald MacKay believes the delays are also the chief cause for a steep decline in the number of applications to the International Trade Administration Commission of South Africa (Itac) for duty increases or reductions.
The report shows that only four new applications were made by private firms in the six-months to June 30, a ten-year low.
“At times of economic distress, we should see the use of trade policy instruments rising, yet we find the very opposite happening,” Mackay argues.
Macsteel CEO Mike Benfield confirms the report’s assertion that business is opting out from using the trade remedy, indicating that the circumstances that prevailed at the time of the application typically no longer applied by the time a decision is eventually made.
For instance, Macsteel’s application for a 10% duty on black bar was overtaken by other market circumstances, such as intensifying loadshedding, which had become even more threatening to the future of its bright-bar facility than import competition.
The effectiveness of the proposed protection, Benfield adds, is often undermined further by the proposed reciprocal-agreement stipulations attached to the proposed duty.
The report, which is the third produced by XA, calls for a rethink of such reciprocal agreements, arguing that they are being unevenly applied, add significant cost without a commensurate benefit, slow down the process, and are causing businesses to opt out of the process.
It also asserts that the delays are costly, calculating them at R2.6-billion in duties having been paid where there is no local producer and R4-billion in duties not collected in duties where protection has been requested.
These costs have been determined by calculating the difference between the current duty and the requested duty and multiplying this rate difference by the value imported from month seven of an investigation up until June 30, 2023.
The report indicates that Itac is not the only reason for the slowing turnaround times, with the evidence pointing to rising dwell times with the two responsible Ministers, Trade, Industry and Competition Minister Ebrahim Patel and Finance Minister Enoch Godongwana.
MacKay confirms that the report’s findings have been shared with Itac and the government departments and that an initiative is under way in a bid to have lawmakers discuss its contents at the level of a portfolio committee meeting.
The information has also been shared with Business Unity South Africa and there are indications that the formation plans to prioritise discussions with government on the delays in an effort to secure a solution.
XA has also outlined a possible import investigation masterplan, which it believes could help remedy the problem.
“We are left with a trade policy system which has almost completely ceased working. This has to be addressed,” MacKay avers.