7.7 The dtic will work with the Steel Oversight Council to reach agreement in the second phase of the implementation of the Master Plan with the DPE, the Department of Transport, the Auditor General, the SABS and the National Prosecuting Authority on partnerships with these agencies to monitor localization. 8 IMPORT REPLACEMENT 8.1 There are many opportunities for import replacement. The industry must be competitive, but opportunities will also be increased by effective implementation of the designated product regulations by the SOEs and municipalities and the prevention of illicit and sub-standard imports. The import replacement of an estimated 200 000 tonnes of final products will generate approximately 800 new direct jobs (multiplier of 4 jobs per 1000 tons sold into the manufacturing sector) and generate a positive turnover of R7bn per annum. Details are set out in Annexure G. In fact, there should be opportunities to exceed these figures. The Steel Oversight Council will work with sectors to identify the opportunities and necessary commitments from industry, unions and government to optimize the import replacements. Discussions must include the entire value chain for each sector. Some companies are already investing in plant to produce the higher value-added products for import replacement. 8.2 Building on success is crucial. The wire industry is successful. Most of the companies in the sector have invested in recent years, are efficient and utilize up-to-date technology. Some have withheld dividends for five or more years to fund upgrades. There are very significant opportunities for import replacement if there is effective enforcement of local content and prevention of illicit imports. The industry is also able to extend its exports, especially into SADC and the rest of Africa and this should be a target of export promotion activities. This is an industry which can be very successful, but is currently threatened with a shortage of wire bars. The discussions between this sector and the dtic will be pursued energetically to optimize the growth of this sector in import replacement and in exports. A sub-sector component to the Master Plan for this industry should be prioritized. 8.3 SARS has agreed to prioritize steel industry imports for investigation and enforcement, especially with respect to under-invoicing and misdeclaration of goods and the export of scrap. Discussions are taking place in the Inter-Agency Task Team concerning the level of resources available. The dtic and SARS have agreed on a reporting framework which does not contravene SARS’ obligation to hold certain information confidential. 8.3.1 SARS has been requested to set out what assistance they require from the industry and how that can best be delivered. The industry will then seek to conclude a memorandum of agreement with SARS to support its activities. SARS already prioritizes scrap exports. One idea is to consider release of trade information on imports of goods according to finer divisions of HS codes. 8.3.2 Criminal prosecutions are important: penalties for illicit imports and exports are not regarded as adequate by the industry. The industry will have to support the SARS and the NPA in providing information about unlawful. It has been proposed by some stakeholders that the Steel Oversight Council should discuss with SARS the possible restriction of certain types of imports to certain ports of entry. 8.4 The dtic is investigating a proposal by the industry for a pre-surveillance system, whereby import permits are required and will be issued automatically. This will allow the industry to track imports and to plan for import replacement. 8.5 The industry has submitted proposals for additional HS codes to be subject to tariffs and for some tariffs to be raised to the bound rate. Specific problems are raised by the use of the code for alloy steel to import steel with minimal boron content exempt from tariffs and the use of the “other” category to cover a range of products inappropriately. ITAC is investigating these and industry must provide information to ITAC on products where “other” categories require investigation. ITAC should be directed to conduct an analysis of the efficacy of the tariff structure across the value chain. Reciprocal commitments must be strengthened and monitored where tariff support is granted in order to minimise the cost-raising effect of import tariffs, especially on the downstream steel industry (e.g. flat steel weighted price basket). Impact assessments on tariff support provided to both upstream and downstream steel products should be conducted with a view to providing fact-based inputs to inform policy and not just unsubstantiated claims from the industry. ITAC will embark on the analysis of the tariff regime for industries targeted for a ‘buy local programme’ with a view to identifying opportunities for import replacement and tariff support.
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The South African Steel and Metal Fabrication Master Plan 1.0
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