good afternoon everyone and thank you for taking the time out to join us for the launch of our fourth import Duty investigations report we started this two years ago because we were struggling to understand why it was taking longer and longer for import Duty investigations to be completed we wanted to understand what the implications were of these delays and a good way to do that appeared to be to to put um a report together and so this is our fourth edition for those of you who don't understand
how all of this works let me perhaps quickly walk you through um how this process works a company would approach the international trade Administration commission they would say we would like to get the duties increased or reduced on it on a given imported product itch would go through a process and eventually assuming they thought there was Merit the case would initiate and at that point we've got four to six weeks depending if people request an extension for interested parties to file their r
esponses that goes from there to the commission at itac who then make a recommendation to the minister of trade industry and competition uh he Ponders this recommendation he sends his recommendation through to the Minister of Finance and eventually the the decision is implemented either to increase or reduce the duties or possibly to reject the application now that process is meant to take six months and uh in exceptional circumstances with Industries in distress it should take four months the r
eality is this is now on average taking 28 months when we released our previous report that was at 25 months so definitely moving in the wrong direction itac have been aware not just itac of course um government has been aware that the amount of time it takes on these cases is important and we see this from itac's own annual report where I it says IAC revised its time frames for investigations from 12 to 6 months for normal tariff investigations and to four months in the case of tariff investiga
tions for vulnerable sectors and I said we are now sitting at 28 months to break this down we've taken we've taken the data from the last 20 years so last time around we looked at the last decade and this time around a very big thank you to anuka the analyst who did really all of the work behind this for putting the analysis together so here we have a 20-year view which is since itac came into existence in 2003 now if you have a look you will see those sky blue charts the bar chart at the top th
e the blue bars on that chart represent each of those bars is a six-month period and the number you are seeing inside the bar is at the end of the six-month period if you took all of the open tariff investigations in that period and you said what is the average period these have been open for you will see in the first period it was open for an average of 6 months and we come to the most recent one and you can see it is now at 28 months now the line the line chart on top of that is also very impo
rtant the line chart tells us whatever the oldest open investigation in that period was um how old was that at the end of that six-month period and we'll see that for the first period it was 33 months old and you'll see as of at the end of December last year that was 57 months old and in fact that investigation in the course of March will turn 5 years old so we simply we've never had any tariff investigation which has been open for 5 years but we're we're about to have our first um in just a ver
y short amount of time now the the dark gray bar below the the blue bars represents the number of of cases finalized in each six-month period and what we've then done is we've broken it up into quartiles and each cortile represents a 5-year period so you'll see this little vertical line and it gives the number of cases finalized in each 5-year period so when you look at these together what you very quickly realize is that the the number of cases being finalized in the at the beginning were happe
ning far quicker at the same time case were being completed faster and more cases were were being wrapped up so we've gone from 136 cases in cortile 1 which is the 200 kind of 4 period 3 4 period onwards to where we are now where we've only finalized 42 cases in The Last 5 Years so we're less than a third of where we were uh 20 years ago so that's quite a that's quite a significant drop performance over that period the implications of this are extremely serious and that is what you can see on th
is particular graph over here so let me explain this to you the the number the the bars again represent a six-month period the numbers in those bars represent the absolute number of tariff applications that were received in a six-month period if it's in green it is it is um brought by the private sector and if it is in the blue color it is applications brought by the public sector and that horizontal line you were seeing is the level that we are currently at in other words in the last 6 months w
e have had two private sector applications that is the lowest level we have been at in 20 years when we released our last report we were at the low level we'd been in that period at three if we go back a little bit further we get to four and that was the lowest period the lowest number we'd been at in in um well we've had a couple of four-month periods but four four applications in a six-month period beforehand but we're in a very bad State here what appears to be happening is we have we have pr
ivate sector disengagement from the use of of these instruments now what we would typically find in periods of economic distress such as we're in at the moment we should be seeing the number of applications rise if you look at the covid period for example you could see it jumps up from three in a in a six-month period to 10 in a six-month period so the numbers the trend should be upwards not downwards and yet we have the very opposite occurring here so this disengagement means that functionally
we are busy use losing the use of the this tariff instrument and that has potentially quite far-reaching implications on the economy because companies which are distressed are choosing to not use this instrument it also means that companies who could be more efficient because they could lower their cost of their raw materials for example are also not using this instrument we now have 50% more tariff investigations open than we did 20 years ago so even though the number of applications has been s
teadily dropping because they not been finalized we're just ending up with a larger and larger pile of Investigations that are not being completed we then also try to understand where is the delay occurring and so again if we look at the top chart the the um the amount of time the average number of months that investigations are spending at itac or the green bar at the bottom and again if we go to the sky blue bar at the top we have the average months with the ministers so we can't separate out
the minister of trade for the Minister of Finance we have to view them together because we don't get told when a decision leaves the minister of trade's desk and goes to the Minister of Finance so that might be a little bit unfair to one of those ministers but nevertheless um this is this is what is occurring and so you'll see the the blue bit of the bar is getting longer and longer over time and that's a that's unusual because the the bulk of the work that has to be done is done by itac not by
the ministers and what has happened is there's there is some duplication that has started occurring so we have a secondary level of investigation that has started happening inside of the DTI um it's not entirely clear why that happens but but it does appear and that might be part of the reason why these delays are getting longer but again you can see the same bar again at the bottom the number of cases being finalized or going down so the cases we have are taking longer and longer and we're gett
ing less and less less of them out of the pipeline which is of course um not too good another important finding particularly in in this report is that the import Duties are simply too sticky so what I mean by this is that when a when an import duty is imposed it shouldn't be there in perpetuity after all there many thousands of tariff codes nobody can keep track of whether all the duties remain applicable companies go out of business others pop up and so the level of Duty needs to be something t
hat is reviewed regularly and so what we did was we took the last 20 years and we broke it up into quintiles um each of them being five years long so from quinti 2 to 5 these periods are each a a 5-year period so four fiveyear periods and then all of the ter of codes that had not been reviewed in fact let me just take a step back and explain something so we broke it up into those four um the the the quintile 2 to5 being a 5year period quintile 1 being the whole period before 2003 what we then di
d was we took all of the Tariff codes that attracted a duty of more than zero and we said which of those tariff codes had Imports coming through them uh in 2023 and we then said for all of those that have an import Duty coming through them when last were they reviewed in other words when last did someone look at them to say these duties should go up or down or remain the same and what we found which to be honest with you was quite startling to us is that 93% of all of the Tariff codes that curre
ntly attract a duty have not been reviewed in the last 20 years so in quintile 2 for example 0.6% of the Tariff codes that attracted a duty in 20123 last had their duties reviewed between 2004 and 2008 and so on and then what we did was we did a duty calculation and we said how much Duty was paid in 2023 on all of these codes and we allocated that duty to each quinti and you will see that approximately 883 billion Rand was paid in duties in 2023 on products that have not had their Duty levels re
considered in over 20 years and here's the distribution by industry it's it's Ultra summarized but let me quickly walk you through what it is you are looking at um the top row is really Automotive it it says Vehicles aircraft vessels but really 99.9% of that is Automotive and Automotive is huge it it it accounts for 50 56% of the import duties collected in South Africa clothing textile Footwear is another 19% and so and so you go down the list and you can see the distribution at this point by by
value of Duty paid now the the the automotive and the clothing sectors are politically quite sensitive and perhaps we will not see these duties change in a hurry but what we do find for things like chemicals Plastics many of these are intermediate products they're not finished goods and with intermediate products when you when you load up a duty onto an intermediate good it means that the product you make out of that thing is going to become more expensive and so in this process if you don't re
view particularly intermediate products prods you can start locking in a high cost into those Supply chains and again you can see the distribution weighs very heavily towards quintile 1 now all of this would be fine if if we could show that this was having necessarily A positive economic impact we take the clothing sectors we took clothing and Footwear which are the two biggest employers um and and should be the biggest employer at the clothing textile Footwear sector um and the reality is the d
uties have not resulted in employment position improving so in 2009 we employed 54,000 people in clothing manufacturer and as of last year we employed about 26,000 so down 52% if we look at Footwear manufacturing we used to employ 8,800 people we now employ 5,6 600 down 36% now not suggesting that the only reason these have dropped is simply because the the duties have been ineffective um and to a degree especially on things like clothing they have been a little ineffective because there's been
an enforcement problem at SS and that is been addressed but the reality is it is it is still a problem so we have to be careful here that we're not loading up costs ineffectively and the question has to be asked how long is a reasonable period for duties to remain in place and it turns out looking at at prior reports the the period most often identify before a review should take place is 3 years that's a very reasonable period so if you look through itac investigation reports they will typically
say this duty is going to go up but we need to look at it again after 3 years sometimes after 5 years sometimes after a shorter period the problem is those reviews almost never happen and um we make available in in our report um a full list of what those reviews are and when they were due to be reviewed and we'd like to strongly suggest that these reviews actually start to happen so that we can start to remove these additional costs in in the supply chain um another big development in in this r
eport has been we now have a new localization term that's been added to reciprocal agreements so let me quickly explain what a reciprocal agreement is when you apply for a duty increase or for Duty relief you are you are typically presented at the end of the process with a contract to sign and that contract asks you to make commitments to increase employment if you're asking for a duty increase to not put your prices up be Beyond a certain level um to make a certain amount of investment to to in
vest the certain amount in training and importantly it's it's called an irrevocable undertaking so the contract says that government can essentially hold you to the terms that you've agreed to well a new term has now been added to these reciprocal agreements and the new term is a localization requirement and so if you require a a duty reduction or Duty relief government will say to you there there may be and in some cases there will be a future manufacturer of this product if you're going to rec
eive the duty relief we need you to make a hard commitment to um to procuring from this company when it comes online this is a hugely problematic term because firstly the identity of the company that you're asked to commit to is completely unknown and it is not disclosed um the company there doesn't participate in the itac investigation remember all of this is happening after the investigation of has left itac now the problem when this happens is that itac doesn't have sight of their arguments b
ut in fact nor does anyone else who participated in the investigation so what's happening here is you've got a you've got a separate process and I I I think that undermines I role in these investigations um itac's role is to be independent their job is to adjudicate these decisions and I think this whole process is worse off when they are bypassed and um effectively it it weakens their ability to fulfill their primary mandate the other part of this is that unlike a normal investor who would who
would for example set up their Factory or intense setting up their Factory they would go and do a market assessment they would go visit some potential clients and they would say look this is what I intend doing you know would you give me a commitment here's perhaps a sample of what I can manufacture this is very different what we have here is the DTC directly approaching the applicant so the applicant is asking for Duty relief or an increase whatever it might be and the commitment they need to m
ake is not being made to the company it's happening with government uh applying pressure and this changes the role of of government from being a regulator to an active competitor and i' in fact changed the wording here I initially had down um to a participant but the fact of the matter is When government is doing the selling for a company um they're an active component of the market and that is a that is a problem now there're also issues that that then happen from a competition commission persp
ective if you've got a thriving sector with many different companies that are potentially importing a material and you compel all of them to go and purchase from a single domestic manufacturer um the effect of that is to to massively concentrate the market and ironically if the same process was happening with a private sector company instead of government then would be liable to some fairly serious fines under the competition act but that is doesn't seem to be a consideration here where governme
nt is is trying to concentrate the market themselves and I think in there where're we're certainly going to see problems over the next few years if this is aggressively implemented I suspect um the the connection between the actions from a trade perspective and the actions from a competition perspective would have to be looked at a little a little more closely again these localization initiatives despite what their good intentions might be have not put a dent into unemployment um when the first
industrial policy action plan was was issued our unemployment rate was just over 20% we're now sitting at 41% so we haven't seen we certainly haven't seen a decline and that's the primary objective of all of this is to to get to grips with South Africa's unemployment problem so if we are going to intervene aggressively I think it's important that the aggressive intervention results in a good economic outcome and there's very little indication of that which makes me quite nervous that these inter
ventions might be causing more harm than good last the last report we introduced the sugar duties for those who don't know the way the duties on sugar work is different to all other products um sugar duties move up or down depending on the global sugar price there is no investigation that needs to occur when the global price of sugar drops below a certain reference price the duties automatically need to move up and and vice versa if it gets too expensive now the triggers keep getting missed and
we'll go through some of those numbers there was a trigger hit in the middle of January which should have seen the duties on sugar increase in this case to one R 34 per kilogram just to put some numbers to this for every day that that delay persists there is a million Rand in duties not being paid to date the delay in in that implementation has so far cost the fisus 16 million Rand um so that is significant and it's significant not so much because SARS wants to have more money it is significant
because the domestic sugar producers who are already a a distressed part of the economy are now forced to compete toe-to-toe with much cheaper and bear in mind often subsidized sugar making it very difficult for them so the the the the pressure I'm concerned about is that that we are taking a million Rand a day out of the sugar industry's Pockets because they're unable to price properly the flip side also happens of course when Duty should move down and at that point the consumer pays a premium
on that product while the the delays occur um we know it should take 30 days for for these investigations to wrap up because this is what came up in a grain sa court case in 2016 where it explains that that for the most part the duty changes took a month this related to wheat not to Sugar but the wheat triggers work in the absolutely identical way and so it it follows that we could apply the same the same logic um and the reality is we average out at the moment at about 78 days again we've tried
to understand where is the delay occurring so when we talk about a delay here we're only measuring when the trigger was hit and acted on and you will see the the green bar at the bottom is the amount of time spent with the ministers and the blue bar at the top is the amount of time spent at itac so you can see itac is doing their job pretty well over here it's getting off their desk quickly it's what happens to it after it leaves itac this is particularly confusing though because there isn't an
investigation required you can also see the number of triggers being acted on a have been dropping so we we've got everything taking longer but less of it there to to investigate which is obviously not a not a good thing we then looked at the period from 2014 which is really when this this kind of structure of Duty came in and we've only got one incident where an investigation was actually wrapped up in 30 days on sugar uh 12 of the the the triggers that were hit um was simply missed or or not
implemented so the the problem is becoming particularly acute and needs to you know I'd argue be addressed I'm struggling to understand why this this is a problem we we talk about this in the report I didn't put the quote in the in the slide deck but judge mentions in in the the saasa sugar case that that itac National Treasury SS and DTI need to get together to figure out how to get these processes moving quicker um that process has not happened which is why we we still sit here and that's you
know six seven years ago but that becomes really important that we we listen to what the judge said and we address this the implications of this not having happened is that since 2014 709 million Rand has been overpaid in duties either because the triggers were just simply missed or they they happened but they happened too late another 1.6 billion Rand was underpaid for the same reasons plus also because of an error in one of the calculations that resulted in the wrong Duty being imposed this is
not a hard problem to solve but it is an important problem to solve especially because of the state that our sugar industry finds itself in and so in keeping with with how we approach all of these things we we've going to put out our uh import Duty excuse me our import Duty master plan and let's just quickly get through what it is we are we are recommending be done here um we recommend completely getting rid of these reciprocal agreements there is no evidence I have seen that they are deliverin
g a net economic benefit um what they are what they do to be doing is massively delaying the process and we know absolutely that that has a tremendous economic cost most obviously manifesting through the the loss of of faith in the in these programs um we we want to recommend we've recommended this from our first report onwards that that the regulations need to be amended to put hard limits in place investigations should not be allowed to go on for more than 12 months if it is an itac anti-dumpi
ng investigation for example it has a legislated hard cut off at 18 months and the reality is that those investigations do not run over 18 months very often at all so having the deadline I believe would result in these cases being resolved quicker um I'm just going to touch on the more important ones here um I if we can't get rid of the reciprocal agreements then I would say we we need to at the very least know when they were signed and in a perfect world I'd even say they should be published I'
d like to give this a little bit more thought but if we're going to have government as an active competitor in the market it strikes me as being extremely important to know what what they they extracted as concessions from companies so the minute the minute this changes into government kind of becoming the Salesforce of a of a private sector competitor I think the secrecy around these agreements is is then problematic I'd like to also suggest that we have a a list of all private settlements publ
ished what I mean by this is there are times when someone goes to itch and says look I'd like to get the duties increased on on this product and maybe they Chang their mind afterwards and they withdraw their application or there's a private settlement and but that is never published if you're on the other side of that you're waiting for a decision and the fact that you don't know that it's been settled means that you may not be making for example an investment decision that you would normally ma
ke so the fact that they're not published um makes it difficult this is not a hugely common problem and I I I don't think this has been done with with any malice in mind but I think it's a good idea for for there to be better disclosure um around all of this all of the duty increases that have been put through I believe they they need to be reviewed I mean we've put this all the way back to 20 years uh and so absolutely anyone can go and have a look at it Duty changes when they are imposed espec
ially recently ITC absolutely publishes the the period by which they should be reviewed I'm inclined to think it should go a step further and they should even mandate by when and just give a date to say this is going to initiate on that date and and follow through U there's confusion there were court cases relating to the roles of the Ministers of trade and the Ministers of finance and who is responsible for what the the legislation needs to be updated to reflect the outcomes of the court case a
t present what's happening is we're we're not seeing we're not seeing the legislation reflect what the courts decided on and I don't think it's fair for companies to be expected to be familiar with with court cases in a space that they typically may never deal in um the proposed process by the judge I'd argue that has to happen um we would like to see if there's a delay on on sugar or wheat changes that that the party responsible for the delay needs to give their reasons I put an LOL in Brackets
because we all know that's never going to happen we will be requesting a an opportunity to present the findings of this report to the Parliamentary oversight committee I think an intervention needs to happen here before we utterly lose the use of these instruments with some very horrible consequences to to the private sector at a time when they they need the ability to access these instruments I'd argue more than ever um final comment again please remember we have live tariff tracker dashboards
we've made some very exciting updates to it you can access it at the website address at the bottom of my slides uh it's free of charge just register log in you can have a look at whatever you want you can download the full report from there you can also have a look for example at the list of of Investigations which are due what dates they were due at Etc so um use it share it with all of your friends we are trying to get the business sector more involved with this very important problem there's
no cost involved all you do is register and you've got immediate access at um at any time and I am absolutely done uh absolutely done do we do we have any questions I'm going to I'm going to start to answer some of the ones that were typed and then we'll take some some uh verbal ones gustaff very important to note that the increase in time taken to complete investigations starts exactly when Patel was appointed as minister of trade sure that's nothing but a incidence gustaff um and unfortunatel
y we we bungled something with the links people were not getting their confirmations I've got lots of Nas here um but because of the way Nadia circulated the links to everyone but let me quickly read what it says hi Donald interesting to note that the public sector institutions also submitted tariff applications can you shed light on what those applications would entail is it for industrial policy purposes so the answer is yes sometimes it is for industrial policy purposes sometimes they would i
nitiate a a review which is one of those things we think are very good so itac for example about a year ago self-initiated a review on the duties on aluminium because they were not certain if the duties were appropriate and so the the the applications that we um we see from the the public sector are typically for industrial policy or just to get a sense of if the the duty level are correct at tozani surprised by Automotive especially considering the apdp program a manufacturers not taking advant
age of that particular rebate program Ah that's a very good question so I'll tell you why this is very high the absolutely are taking advantage but bear in mind the vast majority of cars sold in South Africa are not manufactured in South Africa so what is happening is the the automotive producers are are generating production rebate credit certificates which they can then use to offset against their own import Duty liability but they're far more cars imported than they are production rebay credi
t certificates and so what we see as the duty paid on on all of the models of cars that are not made locally so if you think companies like Hyundai Kia Etc have no production here that is where most of those those Duties are coming from uh it appears the DTI seat does not trust the itac recommendation yes uh that does appear to be the case um yeah have we weaponized trade protection measures in in South Africa well I don't think so and in fact I think a lot of this has been done I don't think it
's been done in bad faith but I think the outcome of this is quite harmful so what we what we instead find is there's a desire to produce more products locally So within government they want to see more localization the way that those interventions occur is then by putting import duties in place so it's one of the ways that that occurs the problem is the import Duties are not resulting in the investment so the duties are going in but the investment is not following and the investment is not resu
lting in employment so all we're doing is we're just inflating the cost of products but we're not getting the effect that we're looking for and there isn't a because there isn't a process of reviewing this uh all that happens is the duties go in and and as you saw earlier they just remain in place forever um Anonymous says we have some of the best fiscal policy transparent transparent transparency characteristics in the world this was again mentioned in the budget review last week but it would a
ppear that we have the opposite for trade and industrial policy yes that's absolutely true and I don't think that is an accident at all definitely more of a feature than a bug of the system in part this happens because government is attempting to to extract jobs from companies one interaction at a time so you're you're sitting with company a and you're saying you're asking me for this whoever the person is with the that has The Misfortune of of being the person to to make the application governm
ent is attempting to extract what they can from them until we had published the report all of those were being done in secret uh that's obviously problematic I again I wouldn't suggest that there's any corruption but there's tremendous potential for corruption in a system like this so yes it is it is not only is it not in the public domain it is becoming more secretive not less as as time passes and I don't think secret deals are are never never good uh my to your question any news on SARS impro
ving their Compliance Unit I can't answer your question immediately but we are having a meeting with SARS very soon on that discussion point so we met them about a month ago to talk about it we've got an update meeting after probably happen in the course of March and I'll have a I'll have a better answer there but my understanding is yes that they are working hard on on addressing that uh do we know if if other Emerging Market Market countries are also experiencing the same Lull in the utilizati
on of trade protection instruments the developed world is certainly not yes that's absolutely correct I don't have hard data on that and the processes vary quite dramatically globally around how tariff reviews happen so I don't have the Benchmark data but but I absolutely agree with your comment that the developed world is certainly not is there a role to be played by local authorities provinces to support the submission to the Parliamentary debate yes I think the Absolut Ely is um we we are loo
king for as much support as possible I am I am quite distressed at how little is being done to address this so any support from from local authorities and provinces to to get this discussion happening would be tremendously appreciated um what needs to happen for this to fall on receptive ears um or hands that can turn the ideas to action what are the requ quied action points and what is the prospect of success so in fact we we're not thank you Adrian we're not we're not entirely cutting our wris
ts at this point a couple of things have happened the the deterioration for this period should have been considerably worse than it was so we can we can tell for example as the the periods start to run to closure our six-month periods where we were're putting uh our report cut off reporting periods on know and we could see as the runup gets close to that period investigations start getting finalized so that there does appear to be some action but it has to be a lot more than that we've we've had
many meetings with with itac and right after this we will request a meeting with the commission to address them we've attempted for two years now to have a constructive meeting with DTI that has not succeeded unfortunately but we will we will keep persevering and we will again request the meeting with the minister to discuss this we have to get to a point where it is resolved but I do think the the publicity and putting the data into the public domain has made people more aware we are talking t
o the bigger business organizations to get behind what we are trying to do before we completely lose these instruments uh please clarify on reciprocal agreements do you mean with other countries my apology is there no that's not what I mean what I'm saying is government is requiring a company let's say in my example we have a a producer who wants to get Duty relief on a raw material when if itac approves their Duty relief government will say to them I need you to sign an agreement with governmen
t that you will create a certain number of jobs that you will invest a certain amount in your factory at Etc that commitment is made for a three-year period they also call it an irrevocable undertaking it's just synonymous for the same agreement and no so it's not with it's not with another country it is between government and the applicant now you can quickly imagine the problems that arise if if you happen to be the company that brought the application but you have five competitors who benefit
but didn't apply and you're stuck making the Comm M so the problem here is it's getting more and more onerous and you know I think I think that's that's just the net negative have you investigated the time ITC takes to complete its investigation has it remained the same let me quickly go back it it uh it most certainly has has done anything but remain the same um my apologies folks let me go back to that chart so if you if you have a look at that chart the to chart on top you could see on avera
ge it was taking 8 months for an investigation to be completed 20 years ago about 10 years ago it was taking 5 months to be completed and it's now taking 28 months so absolutely not the the deterioration in performance has been astonishing um I'm very careful though to to blame itac because I don't think much of the problem sits with itac and I think they're trying very hard to resolve this problem but I do think the problem sits when everything leaves itac and heads to DTI and Treasury and that
is where the problem I think um this will will be resolved uh regarding the sharing of my presentation yes we will when this is all done Nadia will circulate it to everybody that's here you can also of course just go to the address at the bottom um tools. xag gta.com and you'll be able to download everything there the recording of This will be up on our YouTube channel within a day um is the static arrangement to dohole for duties in essay example import VI company in a Moz idz who turns who in
turn exports into essay at much lower duties um I mean Mike that would be tax evasion so it's certainly not allowed to happen if it does happen I mean that would be a problem so the rules of origin says that the goods have to be manufactured in stic they can't simply be shipped through but you know does it happen probably to some degree but that's a that's not a policy problem that's an enforcement problem at at SS um another anonymous question whose responsibility is it to investigate the effe
ctiveness of the duties well the there isn't a legal responsibility put on to anyone to do that but but itac typically take on that role they've just appointed an economist recently so that's very exciting and I'm sure that will begin to make to make a big difference but the the important bit of this is it has to be reviewed there isn't anyone right now who has the responsibility but I believe itac would best be placed I would also think there's probably scope to look at an independent body doin
g a much bigger review so in other words not looking at at it from inside um my concerns at the moment is we end up we end up with a situation where for example the effectiveness of the duty is measured by saying look we gave these guys Duty relief and they committed to employ five people or we increased the duty and they they benefited and they employed five people so that's a good thing but but that is a very simplistic way of looking at the problem so there are all kinds of consequences to in
creasing duties for example depending where you are in the value chain how elastic the demand for the product is how long it remains in place for the welfare of the consumer Etc and I think there's probably a good opportunity for an independent firm to take a look at such a review to say on balance are our duties generating you know a good or bad outcome and uh if anyone wishes to do that we have the data to support it ah secrecy around reciprocal agreement smacks of good corporate governance as
espoused in King it means not addressing all stakeholders in the process I think you mean U not good corporate governance but yes I completely agree um yeah on the comparison to other jurisdictions sadly I don't at present have it's um it's data that would be very hard to get I mean it's it took literally years for anuka to put together what you guys have seen very quickly here so the ability to get that kind of information I think would be very very difficult but but noted if it's available we
will try uh itch is not the problem it is DTI reciprocal Agreements are nothing else but economic growth by decree it does not work sa Matrix equals evidence Mike DTI have appointed Genesis to review the effectiveness of trade policy have you participated in this review it seems goodness news that they are reviewing this your thoughts um I was not aware that Genesis are reviewing trade policy and um I have not being contacted but I do think it's a good thing that it is being reviewed by the way
we don't mention this here but but South Africa's kind of updated trade policy was was recently published there's another updated policy on localization which has come out um I'm you know again we're we're less concerned here with whether localization or protectionist stances are good or bad we're saying even if you love even if you love localization in our last report I said more than you love ice cream you still you still have a problem here in that you're not achieving localization if it tak
es you five years to make a decision no company is going to sit on an investment decision for five years uh Anonymous wondered if you could speak to how protection measures for steel factor into broader negotiations between dtic and amsa to sustain domestic steel production yeah I guess this has become particularly pertinent with the potential closure of of Newcastle which I I really hope doesn't happen the steel sector is unbelievably complicated because government has intervened all over the p
lace and I think the the sustainability of domestic steel is not just a question of how well arom metal for example can manufacture hot coil we've had other interventions in the scrap metal sector which for example has dramatically lowered the price of scrap metal which means all of the minimals that where Where arel Metal competes in an overlapping space with a minial um they're unable to compete because the subsidies going to the minimals distort the price so much that arel can't manufacture a
t those prices those distortions are huge and they continuously get bigger so the sustainability would also require some policy position changes and I think the the very aggressive and very complicated interventions in that steel value chain have placed the whole of the steel sector at risk so I would argue less regulation around steel would probably result in a more successful steel sector Mike I mean I'm seeing you here are you do you want to take a swing at that being the CEO of Max Steel Mik
e no well Mike is muted I had put you on the spot my apologies Mike um does anyone else want to perhaps pose A question put your hand up and we can we can answer as best as possible no all right excellent everybody please i' I'd encourage you to to please go and visit tools. xag gta.com um you can register view everything it'll be kept up to date which means if you go into the site you can at any given time see what the status is if you're exposed and one of your one of your one of the cases we'
re talking about oh sorry can someone unmute Mike I I'll get to the question in a second my my apologies about that the oh yes if you go to the website you will be able to view all of the open investigations you can see how long they've been outstanding for what the implications are per case um as cases get resolve the the the um the site will update so we're trying to give everybody the the best and most accurate version of the truth at any given time um Mike I I'll just come back and repeat my
question again the anonymous question was um wondering if you could speak to our protection measures for steel factor into broader negotiations between DTC and amsa to sustain domestic steel production Mike CEO of Max Steel you have the floor if you're unmuted yeah a little bit you know obviously can you hear me Donald yes yes yes clearly thank you um hi um you know there clearly negotiations between MSA and government around trying to ensure that Newcastle remain sustainable they've deferred t
he decision for further 6 months uh pending uh agreements as and that's public knowledge um that's not news um so we wait to see what those what those uh subsidies uh are going to be and and uh what the impact of that will be typically it revolves around transet Logistics um I think the scrap the scrap duties have been essentially uh lifted by virtue of those um the export of scrap having ceased has come to an end um there the PPS system which is the preferential procurement system is in place i
n scrap so there is an element of that still in place where local scrap users can buy scrap at a discount uh relative to an export price um so that there there's a lot on the go I think uh we're all very concerned about the sustainability of the of the steel sector as you put it earlier um those negotiations and outcomes will will will see the light of day in the next few weeks months I suppose um It's it's hot topics um whether that will create sustainability for the steel sector in the face of
excess demand excess Supply over demand is is questionable um I think fundamentally the country has to to take another step in terms of creating positivity positive sentiment building infrastructure um and and and boosting demand I think trade protection around finished goods is key uh we need a boost Manufacturing in this country um and and that's where trade policy should be directed um fundamentally the steel sector is is is suffering from a lack of demand um plus the overcapacity brought ab
out by trade policy um so very complicated as you quite rightly said Donald and um we wait and see see yeah so maybe add a comment which I think is important so you you can't protect yourself to growth you you you have to the you have to get the growth first and then the protection becomes less important so I mean big part of the challenge not just with this sector but because there's no growth in South Africa everybody is is fighting over a shrinking pie and because we've had a just a almost co
mplete failure of our infrastructure for example we then have the additional problem that that South African manufacturers are becoming less competitive simply by being here you know if you did everything as you did 10 years ago you would be far less competitive now because you have to contend with escom and broken ports and you know insert whatever other woe you wish and so by doing that you can't you can't remedy that problem by just saying let's just keep giving more Duty protection and I thi
nk that's roughly the position we're in where because government is not taking the hard decisions that would allow the economy to grow we're instead faced with an alternative which is well we won't let it grow but what we'll do is we'll we'll direct the small bit of business in South Africa to a small number of companies yeah I would I would think Mike that the the best thing that could happen to the steel sector would be government to actually do the in investment in infrastructure that they ke
ep threatening to do um you know if demand went up I would think there would be far less complaining about competition from Imports absolutely I you know consistency and in in policy uh is key creating the right environment where we can take risk where there's certainty of what life will look like in five years time when these projects come through you know uh and they start producing um money um is key I think you the private sector is Keen to invest we all wanting to reinvent ourselves in one
way or another uh and grow um but we we can't do that in a with in the in the with the current backdrop of uncertainty around shelding around uh Rand Dollar Port congestion we all want to export in know in a weak currency environment and you know we just can't get our Goods out um you know you hear multiple stories of congestion at the ports impacting our customers for instance you know our customers we all need stock to trade and sell and if it's all stuck in the port we're never going to have
turnover without any turnover there's no margin no marginal profit and no salaries um and and quite frankly we need to start jacking ourselves up and and making sure the and look ultimately government needs to get out of the economy and just become the regulator can't be earning the means of production or the the the key components of what makes this country work get out of ports get out of logistics get out of uh Power that's just my political Soap Box moving coming to the four but you know tha
t's where it needs to be nothing new nothing uh fancy Let's Get Back to Basics you know yeah so in fact Mike we' seen the very opposite happen so the the the degree of interven is getting bigger not smaller and you know as evidenced by this new reciprocal agreement and I think we're we're heading for a position where companies have a real risk of being turned into kind of state managed Enterprises you you you you're having government on your board of directors who are deciding who you should buy
your your product from and that doesn't feel like it has a good ending at all so you know while you were saying government needs to regulate and not participate the opposite is happening far far greater participation if you have a look at the Amendments made to the competition act um and you know these Market inquiries occur and then companies are being instructed that they have to dispose of parts of their business um simply because they've gotten too big so you've been penalized for Success t
his is not necessarily connected to to an abuse of that dominance but just the fat of the dominance is is creating a problem and so with this in mind you know it it appears that we're seeing more not less intervention um another comment customs duty should only be a temporary protection measure for Industries to become competitive I absolutely agree um but this too is is not the case as we've demonstrated to just very quickly bring this up again um 93% of all tariff codes which attracted a duty
and duties were paid on last year last had their level of Duty considered more than 20 years ago these absolutely need to be looked at the big and obvious ones like Automotive maybe the argument would be well government will never budge on that but if you consider all of the others on that list and and I mean there are thousands of tariff codes that we're talking about so we're not saying there not 50 or 100 codes thousands of tariff codes are sitting in that big quintal one bubble may I come he
re and give the yes yes yes go ahead go ahead so overall in 2023 um 3,400 I think tariff codes were um imported that had a duty on that first bubble is around 3,170 tariff coach so it's enormous it is absolutely enormous and that 83 billion Rand I mean whatever percentage of it let's say it's 10% of that shouldn't be paid because there's no domestic producer anymore that's 8.3 billion Rands worth of cost we're adding to the economy with there being absolutely no economic benefit and so add in th
is additional cost to say the right answer would be to remove the duty but to do the right thing I'm not going to require you to give me all of these other conditions is a terrible idea we're penalizing people to do the right thing um and it's extortive you at some point you've got to say what is the objective here is the objective to create a competitive economy or is the objective to micromanage every business that ever interacts with government um I completely disagree nowhere has the private
sector been able to grow a de developmental state that makes no sense because large businesses by its very nature tends to marginalize small Enterprise and if Government steps out of the equation small business will be limited to spasa shops um Let me let me challenge that thank you very much I would I would say we're doing the very opposite of what you you're talking about so if you create a Market that is very concentrated if you endlessly protect only the biggest companies in South Africa th
en where on Earth do you leave space for small businesses to thrive if you have a look at the duty protection we didn't put it in here but perhaps in the next version we will put it in the duty protection we have in South Africa almost all goes to monopolies so let me give you some numbers to that if you take anti-dumping instruments and you look over the last 20 years and we say who were the biggest applicants which companies made the most use of the anti-dumping instrument you will find that a
bout a third of all anti-dumping actions brought in South Africa were brought by five companies uh or five sectors Industries my apologies four of those five sectors are monopolies of those and the four monopolies we have all four of them are more than a 100 years old so again I'm saying Case by case obviously you have to look at things but we are not there is no participation of small businesses in these instruments these instruments lock in a very rigid large set of companies in perpetuity um
to the question of the developmental State I would would argue we have a tremendous amount of government intervention and I'm struggling to see where the benefit has been our per capita GDP continues to fall people are getting poorer so if this is how a developmental state looks I'm struggling to see how this benefits the average person and again I'm I'm not someone who says there should be no government in the market but if you can point to even one if you can point to even one master plan whic
h has generated a net positive benefit um then you'll have my apology but I have yet to see any data supporting the fact that the interventions in the market have yielded a benefit um and to your other point on large business I absolutely agree with you but we protect large business our economy doesn't look any different to how it did under the apartate state you still have a small number of very big companies that dominate that's a low employment environment it's a low Innovation environment an
d the bulk of our protection goes to protecting the biggest businesses um but thank you that's a it's a a very good point thank you very much um that was based on the previous man's comment it seems that the monopolies want to continue monopolizing I agree with you on this very issue okay all right excellent um I would just want to see does anyone else want to either type or put their hand up and ask a question otherwise we will close off all right everyone thank you so much for taking time out
of your busy days to to give me an hour to listen to me drone on a very big thank you again to anuka who did all of the hard work behind this and um please visit the website tools. xag gta.com download the report have a look at the dashboards if any of you were struggling um just let us know and of course all of you that attended you will also be emailed the copy of the report it's not confidential share as widely As You Wish quote from it oh my goodness got two more um are the interventions not
limited by the vantage point of business should business begin to participate hand inand with government in that way we we should attempt not to see them as the enemy but rather how do we form Partnerships with them that lead to a growth environment um absolutely and I'm Not For a Moment if I've come across this government as the enemy I then you know certainly I've made a mistake that's not what I'm trying to say but the their attempts at this the the current the current term being used is soc
ial compacting the reality is that much of that happens in a way that that reduces levels of participation so for example um when you if you look at these master plan committees uh there are whole sectors and whole companies that cannot get onto those committees there's a lot of secret discussions that happen there there's an imbalance created in the market and so what we're doing is we're creating a tremendous amount of economic value if you can figure out how to get into the room and there's a
huge penalty to be paid by everyone who can't get into the room so I would argue that yes but the interventions and interactions with government have to be meaningful we've made recommendations for example that with technology as it is much of these forums can now be opened up to people um there's been very little appetite to do anything with it but I don't think the current way we work which is not business in government but typically one or two businesses in government working hand inand I th
ink the net effect of that is almost always very very negative um ismile interesting question can tariffs be reduced to defeat monopolies in fact that's a very interesting point arel had a 5% Duty on steel now let me rephrase that because I'm I'm picking on arela matal here there was a 5% Duty on steel and then around 2004 government actually removed the duty on steel because they wanted to bring more competition into the market and that's that's a normal that's a normal way things work um again
I'm not I'm not taking the extreme stance which says there should be no duties but I think when Duties are ever green there's very little benefit that that accurs to the country because of that um we are competing with the rest of the world not as South Africans and that seems to be where the issue with our inability to speak and listen to government and business South Africans are their worst enemies when we go out into the global environment yes I I can't argue with you about that guys I'm go
nna I'm gonna have to I'm gonna have to wrap up at this point thank you so much the recording will be on YouTube and you'll be notified when it is up have a have an absolutely wonderful day thank you
Comments