Annual Report (2013/2014) Presentation to the Portfolio

Committee on Economic Development

28 October 2014Siyabulela Tsengiwe

Chief Commissioner

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Contents

1. Introduction.

2. Key Strategic Objectives, Performance Areas & Services.

3. Trend Analysis of import tariff increases and reductions from 2003 to 2013.

4. Tariff Investigations.

5. Anti-Dumping Investigations.

6. Import and Export Control.

7. Judicial Reviews.

8. Corporate Governance.

9. Auditor General’s Report.

10. Financial Performance.

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Introduction

• South Africa’s producers of industrial and agricultural goods will continue to experience cost pressures and global market distortions.

• ITAC support must be complemented by measures that seek to address competitiveness constraints and promote exports.

• Post the economic crisis, the year 2012/13 that preceded the year under review saw the highest number of tariff increases. A peak was reached in 2012/13 and we are now seeing a downward trend.

• Although the global economy is recovering it is not yet robust, which has a negative effect in weakening demand for our exports. This necessitates addressing domestic challenges a priority.

• The Commission follows a developmental approach to tariff setting for both industrial and agricultural goods.

• The Commission’s recommendations are evidenced based and conducted on a case-by-case basis. A pragmatic approach, focussing on the outcomes: domestic production, investment, job retention and creation as well as international competitiveness.

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Key Strategic Objectives, Performance Areas & Services

Ensure contribution to employment creating growth and development through

effective delivery of international trade instruments

International Trade Instruments

What will be pivotal in improving the provision of customs tariffs, trade remedies, and import and export control will be the quality

and turnaround times.

Customs Tariff Investigations[Increasing Duties, Reducing Duties, &

Creation of Rebates]

Trade Remedies Investigations[Antidumping, Countervailing & Safequards]

Import & Export Control[Permits & Enforcement]

Ensure organisational efficiency and effectiveness of ITAC

Business Support Services

oHuman ResourcesoFinance oInformation TechnologyoLegal ServicesoPolicy and Research

Ensure strategic alignment and continued relevance with the

Department of Economic Development and national

agenda

International Trade Technical Advice

ITAC will become more proactive in the provision of technical inputs

and contributions to trade and industrial policy implementation, as

well as trade negotiations at bilateral, regional and multilateral

levels.

Technical Inputs on Trade and Industrial Policy , including Sector

Strategies

Technical Inputs on Trade Negotiations

[WTO, SADC & SACU] ;

Bilateral Agreements [EU, EFTA, MERCOSUR, & INDIA]

The performance of the institution will be driven through appropriate business

solutions, efficient and effective utilisation of material, human and information technology resources.

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Trend Analysis of import tariff increases from 2003 to 2013.

5Chart 1: Number of increases recommended by the Commission

Trend Analysis of import tariff reductions from 2003 to 2013.

6Chart 2: Number of reductions recommended by the Commission

Tariff Investigations Completed During 2013\2014

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

SAPPI Southern Africa (Pty) Ltd Coated fine paper Free - 5% Increase

South African Sugar Association Dollar based reference price for sugar US$358/ton - US$566/ton Increase

South African Poultry Association Whole bird Boneless cuts Bone-in portions Offal Carcasses

27% - 82%5% - 12%18% (220c/kg) - 37%27% - 30%27% - 31%

Increase

Self-initiation X-ray film Status quo at 15% Increase

Safripol (Pty) Ltd High density Polyethylene Declined Increase

Dunrose Trading (Pty) Ltd Wire and pointed screw nails 5% - 15% Increase

RIC Manufacturing CC PTFE tape (Non-stick coating) 10% - 20% Increase

Vaal Sanitary Ware (Pty) Ltd Ceramic sanitary ware Declined Increase

Graftech South Africa (Pty) Ltd Graphite electrodes Free - 10% Increase

Libra Bathrooms (Pty) Ltd Acrylic baths, sinks and wash basins Declined Increase

CBC Fasteners (Pty) Ltd Certain screws, bolts and nuts 10% - 20% Increase

Viking Plastics (Pty) Ltd Blades for windscreen wipers Declined Increase

GEA Aircooled Systems (Pty) Ltd Heat exchange units Free - 15% Increase

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Tariff Investigations Completed During 2013\2014

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Bravo Group Manufacturing (Pty) Ltd Woven impregnated fabrics and rubberised textile fabrics used for the manufacture of upholstered furniture

Approved Rebate

Beaches Clothing cc Knitted fabric for swimwear Declined Rebate

Nyathi Textiles cc Cotton fabric for impregnation or coated fabric under 52.09

Declined Rebate

3M South Africa (Pty) Ltd Polyurethane flat shapes and silicone elastomeric and natural rubber straps for the manufacture of dust masks

Approved Rebate

Self-initiation Worn overcoats Approved quota Rebate

Fast Fox Footwear t/a Little Slipper Company Pile fabric for bedroom footwear Approved Rebate

Unilever (Pty) Ltd Methyl ester Sulphate for washing preparations (detergents)

Approved Rebate

Ceres Fruit Juices (Pty) Ltd Pear juice concentrate for fruit juice Declined Rebate

Ceres Fruit Juices (Pty) Ltd Grape juice concentrate for fruit juice Declined Rebate

Ceres Fruit Juices (Pty) Ltd Cranberry juice concentrate for fruit juice Approved Rebate

Ceres Fruit Juices (Pty) Ltd Passion fruit juice concentrate for fruit juice Declined Rebate

Ninian & Lester (Pty) Ltd Include sleep shorts under rebate item 311.40

Approved Rebate

Self-initiation Aluminium slugs for impact extrusion in the manufacture of aerosol cans

Approved Rebate

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Tariff Investigations Continued

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Sime Darby Hudson & Knight (Pty) Ltd

Refined but not fractioned palm oil used as oil blend in the manufacture of edible fats or oils

Approved Rebate

The Department of Trade and Industry

Review of the wording of rebate item 316.17 for televisions to allow the import of incomplete or unassembled televisions under the rebate

Declined Rebate

Eveready (Pty) Ltd Non-linear glass tubes used in the assembly of Compact Fluorescent Lamps

Declined Rebate

Eveready (Pty) Ltd Amendment of rebate item 316.08/8504.10/01.06 on fluorescent lamps

Approved Rebate

Economic Development Department

Review of the Rebate item 317.03 APDP Regulations and Guidelines

Approved Rebate

The Department of Trade and Industry

Amendment to Schedule 3 to allow enterprises in a Customs Controlled Area (CCA) of the Industrial Development Zone (IDZ) to use Schedule 3 rebates

Approved Rebate

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Tariff Investigations Continued

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Masstores (Pty) Ltd Tents of synthetic fibre Declined Reduction

National Clothing Retail Federation Clothing Declined Reduction

FX Veneers cc Phenolic resin 10% - free Reduction

Llumar Films (Pty) Ltd Polyethylene Terephthalate (PET) film 10% - free Reduction

BLSA (Pty) Ltd TCIA & SDIC Declined Reduction

Cathay Industries Chrome oxide green Declined Reduction

Control Chemicals (Pty) Ltd Calcium Hypochlorite Declined Reduction

General Mills SA (Pty) Ltd Haagen Dazs ice-cream Declined Reduction

Masterparts (Pty) Ltd Engine CV joints 20% - free Reduction

Engineering Process Control CC Expanding plug valves Declined Reduction

Home Of Living Brands (Pty) Ltd Electric frying pans Declined Reduction

Home Of Living Brands (Pty) Ltd Stainless steel pressure cookers Declined Reduction

Home Of Living Brands (Pty) Ltd Electrical smoothing irons Declined Reduction

Specialised Europe BV External Profit Company Carbon fibre bicycles Declined Reduction

National Auto Glass (Pty) Ltd Polyvinyl Butyral (PVB) 10% - free Reduction

Hudaco Trading Pty Ltd Wheel hubs Declined Reduction

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Administration of MIDP & APDP

On 01 January 2013 the APDP replaced the MIDP. The APDP is a customs-based programme comprising a tariff component, production incentive (PI), volume assembly allowance (VAA) and automotive investment scheme (AIS). The AIS is administered by thedti. The objective of the APDP is to create an enabling environment for the domestic industry to significantly grow production volumes and local value addition, leading to the creation of additional employment opportunities across the value chain. Whereas the MIDP was export-oriented, the APDP is based on production.

thedti is the policy making authority for the MIDP/APDP & ITAC administers the program.

Certificates issued under the MIDP:Import Rebate Credit Certificates (IRCCs) – 94% of the 1 213 certificates within set timeframe.

Productive Asset Allowance Certificate(PAAs) – 36% of the 71 PAA certificates within set timeframe.

• Certificates issued under the APDP:Eligible Production Certificates (EPCs) – 68% of the 105 EPC certificates within set timeframe.Production Rebate Credit Certificates (PRCCs) - 87% of the 776 certificates within the set timeframe.

MOTOR INDUSTRY DEVELOPMENT PROGRAM (MIDP)AUTOMOTIVE PRODUCTION AND DEVELOPMENT PROGRAM (APDP)

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Trade Remedies

Product Country Applicant Type Status and Duties

Potato chips (x2) All McCain foods Safeguard Duties imposed

Soda Ash USA Botash Anti-dumping Provisional measures imposed

Frozen bone in portions Germany, Netherlands,

United Kingdom

SAPA Anti-dumping In progress

Graphite Electrodes PRC and India GrafTech Anti-dumping Withdrawn

Coated fine paper PRC Sappi SA Anti-dumping No duties

Unframed mirrors PRC PFG Building Glass Anti-dumping Duties imposed

ORIGINAL INVESTIGATIONS

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Trade Remedies

REVIEWS

Product Country Applicant Type Status and Duties

Picks, spades and

shovels

PRC Lasher Tools Sunset Review Duties maintained and

increased

Wire ropes and

cables

Germany Scaw SA Interim review Duties maintained

Welded link chain China Scaw Metal Chain

Products

Sunset review In process

Tall Oil Fatty Acids Sweden Oleochemical Products Sunset review In process

Gypsum

Plasterboard

Indonesia and

Thailand

St Gobain Sunset review In process

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Trade Remedies

Product Country Applicant Type Initiation date Outcome

Coated fine paper PRC Sappi SA Anti-dumping 25/01/13 No duties

Unframed mirrors PRC PFG Building Glass Anti-dumping 02/11/12 Duties

ORIGINAL INVESTIGATIONS CARRIED FROM PREVIOUS YEAR

Product Country Applicant Type Initiation date Status and Duties

Picks, spades and

shovels

PRC Lasher Tools Sunset Review 26/10/12 Completed. Duties maintained

and increased

SUNSET REVIEW INVESTIGATIONS CARRIED FROM PREVIOUS YEAR

SAFEGUARD INVESTIGATIONS CARRIED FROM PREVIOUS YEAR

Product Country Applicant Type Initiation date Status and Duties

Frozen Potato Chips All McCain Foods Safeguard 08/03/2013 Completed. Duties imposed.

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Import and Export Control

During 2013/2014 import permits issued amounted to 17 332. The target was 13 500.Majority of the permits were for the following imported products:

Marine ResourcesMineral fuels and oilsChemicalsRubber and tyresMetals Mechanical AppliancesAutomotives

 

IMPORT PERMITS ISSUED

EXPORT PERMITS ISSUED

Chapter Description Permits Issued Chapter Description Permits Issued

26 Ore, slag and ash 8 75 Nickel waste and scrap 12

27 Mineral fuels 446 76 Aluminium waste and scrap 1034

28 Inorganic chemicals 792 78 Lead waste and scrap 125

29 Hydrocarbons 962 79 Zinc waste and scrap 90

30 Human blood 3 80 Tin waste and scrap 3

47 Paper waste 82 81 Other base metal waste and scrap 116

72 Ferrous waste and scrap 1571 85 Waste and scrap batteries 36

74 Copper waste and scrap 1239 87 Used motor vehicles 3494

Export permits issued in 2013/2014 amounted to 10 013. The target was 7 500.

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Controls on scrap metal

PRICE PREFERENCE SYSTEM FOR SCRAP METAL EXPORTS (PPS)

• The Minister of Economic Development issued a policy directive in terms of Section 5 of the International Trade Administration Act, directing ITAC to:-

- regulate the exportation of ferrous and non-ferrous waste and scrap;- not allowing ferrous and non-ferrous waste and scrap to be exported unless first offered to the

domestic consumers of scrap metal for a period determined by ITAC and at a price preference determined by ITAC.

The policy intent being to promote scrap metal beneficiation and to reverse the decline in the metal fabricating consuming industries. To allow the domestic industry to have access to affordable quality scrap and to supply inputs into governments infrastructure programme.

• ITAC published guidelines on 16 September 2013 in terms of which ferrous and non-ferrous waste and scrap must be offered to local consumers for a period of 15 working days and at a price preference calculated monthly by ITAC before exportation.

• ITAC published amended guidelines on 12 September 2014 to strengthen the administration of the PPS.

• ITAC published the intention to review the preferential rates for information and comment on 19 September 2014 to have differentiated rates for the different types of scrap metal.

• It is the intention of ITAC to conduct an impact study a year from now.

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Judicial Reviews

• Different and conflicting interests in the value chain of each investigation may lead to court challenges by parties that stand to loose.

• In respect of court cases, ITAC appeared in domestic courts 24 times (High, Supreme and Constitutional courts) since its establishment.

• Out of the 24 cases, 16 were ruled in favour and 8 against ITAC

(the eight were mostly in the early days of ITAC).

• Other jurisdictions face similar challenges, although in differing degrees.

• There is also the WTO Dispute Settlement Mechanism within which government to government disputes are addressed.

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Corporate Governance

• ITAC adheres to all applicable regulations governing the operations of public entities. The policies are developed to ensure effectiveness of corporate governance strategies in terms of applicable legislations or guidelines which include amongst others the following: PFMA; Treasury Regulations; PPPFA and relevant SCM regulations; etc. The checklists have been developed to assist in enhancing compliance and any identified non-compliances are addressed.

• ITAC maintains effective internal controls which are designed to ensure that risks are reduced or managed and that the organisation is able to meet its objectives. ITAC’s internal control measures include amongst others the risk management activities, internal audit activities, the relevant committees (Risk and Audit) and other internal governance structures.

• The internal controls are continuously monitored throughout the year by Management, Internal Audit and by other relevant Committees. All identified gaps are referred for correction to relevant officials.

COMPLIANCE & INTERNAL CONTROLS

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Corporate Governance Continued

• ITAC has risk management unit that conducts risk assessment continuously and then present the risk register to the Risk Management Committee (RMC) for review. Those risks whose status has changed are referred to the Internal Audit Unit to perform independent test of whether the Risk Register is a true reflection of the organisational risks before the RMC can recommend it for approval by Chief Commissioner (CC).

• ITAC Executive Committee monitored the internal controls and relevant risk management processes for 2013/2014 financial year and is satisfied with their effectiveness.

• The RMC played the role of reviewing the organisational risks and made recommendations for improvement on risk management activities implemented by management.

RISK MANAGEMENT

• The Audit Committee (AC) held four normal meetings and one special meeting in the year under review.

• According to the Audit Committee report:

The system of internal control applied by ITAC over financial risk and risk management is effective, efficient and transparent.

The AC is satisfied with the content and quality of monthly and quarterly reports prepared by ITAC management.

The AC is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to ITAC in its audit.

AUDIT COMMITTEE REPORT

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• Irregular Expenditure for ITAC in 2013/2014 amounts to R391 621.00, of which

R 185 640.00 is the recognition of the irregular expenditure identified by AGSA in 2011/2012 audit for the actual expenses of continuing contracts where evaluation criteria was not specified when requesting quotations. The contracts will end in the financial year 2014/2015.

During 2013/2014 ITAC an incurred irregular expenditure of R205 981.00 which relates to awarding of BEE Contribution points to a service provider who did not submit a BEE Certificate when quoting and for the submission of a copy instead of an original Tax Clearance Certificate. The break down of this irregular expenditure amount (R205 981.00) is as follows:-

1. R147 690.00 in relation to procurement without a BEE Certificate.

2. R58 291.00 in relation to procurement with a copy instead of an

original tax clearance certificate.

• In 2013/2014 ITAC did not incur any fruitless and wasteful expenditure.

• The Chief Commissioner has approved the condonation of the above mentioned irregular expenditures and relevant correspondence has been sent to the National Treasury and AG’s Office as required by SCM regulation.

Auditor General Report

IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE

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• ITAC has developed an Audit Action Plan template with clear actions to be taken to

address the audit findings relating to compliance as identified by AGSA. • Some of the findings have already been addressed and progress is being reported on

other outstanding findings.• Internal Audit Unit has been given the responsibility to examine as part of its audit

process the Audit Action Plan to test whether the proposed or implemented actions will or have addressed the AG findings.

• The Executive Committee also plays the role of monitoring the implementation of the action plan through a report presented on Action Plan progress on implementation.

OPINION OF AUDITOR GENERAL

• ITAC has obtained an unqualified opinion in 2013/ 2014 financial year.

IMPLEMENTATION OF AUDIT RECOMMENDATIONS

Auditor General ReportContinued

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Financial Position

• ITAC has a sound financial position as assets are more than its liabilities. Total assets amount to R33.8 million and total liabilities amount to R12.6 million

• The graphic presentation of total assets of R33.8 million is reflected below.

OPERATING RESULTS – TOTAL ASSETS FOR 2013-2014

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Financial Position Continued

• The graphic presentation of total liabilities of R12.6 million is reflected below.

OPERATING RESULTS – TOTAL LIABILITIES FOR 2013-2014

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Financial Performance

• ITAC’s total revenue amounts to R82 million and total expenditure amounts to R82.9 million and there was a deficit of R890 163 in 2013-2014. The expenses above budget which resulted in deficit were financed from approved retained surplus.

OPERATING RESULTS - REVENUE AND EXPENSES

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Thank You

Office Contact Details: 012 394 3713

Cell: 082 454 8979 stsengiwe@itac.org.za

www.itac.org.za

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