The Committee continued with the public hearings on the Revised Policy Action Plan (IPAP 2). Two organisations made submissions. The Southern Africa Stainless Steel Association viewed the Industrial Action Policy Plan as a positive step. It stated that the focus should be on key areas like public procurement, development of small and medium enterprises, and developing a successful proudly South African campaign. It also highlighted five initiatives it had undertaken as an industry, namely: a craft project, hollowware project, agri-processing, solar water heating project, and infrastructure project. Members asked what the association thought government should do to ensure that South Africa could compete globally, asked about comparative costs, whether the Department of Trade and Industry (dti) supported the projects, whether there was economy of scale in the industry, and what new legislation might be needed. They also asked about availability of raw material, in relation to production, what was regarded as “sustainable employment” and who were the Association’s members. The shift from manufacturing to importing since 2004 was questioned. The Committee stressed that written responses should be furnished and that perhaps other role players could be invited to comment.
Aspen Pharmcare maintained that the Industrial Action Policy would only succeed if all relevant departments were aligned and prepared to implement the programme provisions, with annual monitoring to review progress on implementation. If this was carried out and aligned to certain time pressures, it was believed, that the Industrial Action Policy Plan could make a significant contribution to the South African economy.
The Parliamentary Research Unit took the Committee through a summary trade fundamentals and trends in trade, in order to explain the basic definitions and assumptions around trade, trade theory and practice, types of tariffs, and the impact of regulation on economy.
The International Trade and Economic Development Division of the Department of Trade and Industry presented a Trade Strategy discussion document. The document did not attempt to answer every question related to trade. It only outlined approaches to tariff reforms, explained what the trade strategy was about, and emphasised trade related issues that the Department would focus upon in future. Members asked questions about issues of corruption in procurement, why
Revised Policy Action Plan (IPAP2): Public hearings
Southern Africa Stainless Steel Development Association (Sassda) submission
Mr Tim Raaff, Chairman, Southern Africa Stainless Steel Development Association, (Sassda), told the Committee that the mandate given to this Association (Sassda) by its benefactors was to grow the consumption of stainless steel products converted in
Problems facing the industry included, quality and tariff manipulation were problems cited. To remedy the situation, Sassda had decided to work with the South African Revenue Services (SARS), had undertaken consumer education and protection, had established standards, and issued accreditation to local manufacturers.
In respect of safety and health, Sassda had experienced contaminated imports. As a result, it had to ensure standards were in place and assisted in policing imported products. In the fields of skills development and retention, it had forged relationship with organised labour and business, was working with educational institutions to ensure that industry needs were met, and channeled resources to enterprise development. In regard to manufacturing challenges on matters of capital and technology, opportunities hade been identified, and Sassda had facilitated “meeting of the minds” amongst players in the industry.
Sassda had initiated five projects in the industry. The first, a Craft Project, involved the manufacturing of Stainless Steel Craft items on a regional basis. It was employing four to six people per kilogramme of Stainless Steel. It was based in
The third project revolved around the hollowware industry, through improved manufacturing methods. Sassda had instilled a “Proudly South Africa” consumer mindset. As a result, between 100 and 200 new jobs had been created. Together with the Department of Trade and Industry, a study was to be undertaken to expose the potential. The fourth project involved infrastructure and Agri-processing projects, which were aimed at promoting the use of local products in projects such as railway stations, airports, hospitals, correctional centres, and military installations. This had created employment already and enhanced technology. Plans were on the cards to form interest groups.
Sassda saw IPAP as a positive step in the right direction as it would leverage public procurement, lock out unsafe and poor quality products, develop SMMEs and provide cohesion at all three spheres of government. Possible hurdles that it had identified included the difficulties of changing mindsets, spreading the word especially to the owners of small business, and avoiding corruption.
Dr M Oriani-Ambrosini (IFP) asked Sassda what it thought the government should do to make sure the country could compete globally, taking advantage of the fact that steel was produced locally.
Mr Raaff explained there was potential to expand and enter the global market. As to exactly how this could be done, he said that Sassda needed to discuss the matter and would respond in writing to that question.
Prof B Turok (ANC) asked Mr Raaff for evidence on comparative costs. Secondly, he wanted to know if the dti was supportive of the projects Sassda was undertaking and what it had done to overcome problems related to the projects. Thirdly, he asked Mr Raaff to tell the Committee of the economies of scale in the industry. Prof Turok would like to see many entrepreneurs. Fourthly, regarding tenders and procurement, Prof Turok said it was not enough for Sassda to complain, but it should rather tell the Committee if the latter should push for new legislation to curb “tenderpreneurs”.
Mr Raaff responded, on the issue on comparative costing, that it was best to put up a schedule so as to get an idea of what it was. Further, he noted that the dti was supportive of the Sassda projects. Sassda had forwarded development plans and dti had responded positively. A joint committee that was meeting monthly was established to look at some of the business issues. In regard to the economies of scale, he said that volumes were too small to make this effective. Lastly, he said that Sassda would forward a proposal on what could be done about corruption in procurement.
Mr S Marais (DA) wanted to know the availability of raw material in relation to what
Mr Raaff explained that in relation to availability of raw materials, market volumes in
Ms F Hajaig (ANC) asked Sassda to explain why there was a major shift from manufacturing to importing since 2004. Furthermore, in relation to import manipulation, she said that even if kitchenware was imported from
Mr Raaff said Sassda would like to assist government to put in place necessary mechanisms to fight manipulated imports. It would like to work with customs officials in terms of providing training and advice.
The Chairperson asked Sassda to reply in writing to answers on which it had indicated that it could expand further. She commented that Sassda could not provide details at this meeting, and it should perhaps prepare more thoroughly, see how best to represent the interest of its members, and could bring other role players as well, when it appeared before the Committee next time.
Aspen Pharmcare Submission
Mr Stavros Nicolaou, Senior Executive, Aspen Pharmcare, briefly introduced and described
The position of
It was felt the current tender system was set in a way that had “boom-bust” characteristics. It had the potential to cause de-industrialisation, job and skills reduction, and loss of productive capacity. The State was procuring more medicines from abroad than locally. Imported content accounted for 53% of the value of all public sector medicine tenders. On average, only 47% of total tender value was local content, even in commodity markets.
In regard to point matching, he said that short and medium term interventions were needed, which also required policy cohesion across the Department of Trade and Industry (dti) and Department of Health (DOH). The domestic producer needed to be defined in the pharma context. It was noted that there were details that needed to be included in the policy. For example, once the preferential points were applied, and those of the local tenderer happened to be higher, the local company then should have the right to match the importer. If the bid price of the importer matched, the local should get the tender.
competitiveness, cost-effectiveness, fairness & equitability, and procedural fairness.
Point matching would cost the State nothing extra and was not prejudicial to importers because they could invest in
In regard to policy coordination, it was felt that all departments should be on the same side and speak with one voice. On matters of trade development policies,
Mr Marais wanted to know if there were any proposals given to the dti regarding the Capex Incentive Scheme.
Mr Nicolaou said he would send the Committee the proposals or submissions made to the dti.
Prof Turok commented that it seemed to him that an important statement had been made about the government coordination, and that the Committee’s findings on the issue would be inadequate if that was not addressed. He suggested that National Treasury and other government departments be invited to find answers to the problem of lack of coherence and coordination between departments. He further suggested that the dti should tell the Committee if the point-matching principle was correct and fair, particularly on the suggestion that if there was equal weighting, preference be given to the local.
Mr Nicolaou elaborated that very often when tenders went out, it would be discovered that the tenderers had “missed out” before starting dealing with any policy coherence. The pharma industry, through National Economic Development and Labour Council (Nedlac) had convened a Ministerial round table last December to iron out the cohesion issue. He noted when policy documents came out, they caused investment uncertainty, and that investors would concur that a tender was awarded but no policy was adhered to.
Ms C Kotsi (COPE) commented that
Mr Nicolaou explained that
The Chairperson commented that
Trade Fundamentals and Trade Policy: Parliamentary Research Unit Presentation
Mr Lwazi Mahlangu, Parliamentary Researcher, made a presentation on Trade Fundamentals and Trade Policy, which focused on the basics and definition of concepts in the discipline of trade. Trade was explained as the exchange of capital, goods and services across international and local borders or territories. Nations traded because they had surplus production, which could be turned into profit, and because this would earning a foreign currency through export of their commodities. They would import because some products were not available or could not be produced in their own country, and sometimes they would consider efficient production and price differentials, such as the importing of clothes from
Trade depended on the comparative advantage of the country. A comparative advantage was a simple model in international trade economics, and was based on the premise that countries would export goods that they could produce relatively efficiently, and import goods that they could only produce relatively inefficiently. By specialising in production, and by trading with other countries, it was possible for countries to increase their incomes and consumption, and this was the Gross Domestic Product.
Mr Mahlangu outlined trade theory and practice. It was noted that countries did not specialise exclusively in the production and export of just a single product or service, and they would rather produce at least some goods and services that other countries could produce more efficiently. A lower income country might, in theory, be able to produce a particular product more efficiently than developed countries could, but that country might not be able to identify potential buyers or transport the item cheaply enough to warrant it being developed for export. Generally, countries with a relative abundance of low-skilled labour tended to specialise in the production and export of items for which low-skilled labour was the predominant cost component. On the other hand, countries with a relative abundance of capital tended to specialise in the production and export of items for which capital was the predominant component of cost.
Governments often manipulated or regulated trade in a number of ways, by restricting imports. They did this by imposing quotas and tariffs, and encouraging exports through subsidies. Six types of tariffs were identified. Firstly, the ad valorem tariff was a set percentage of the value of the goods that were being imported. A specific tariff represented a specific amount of money that would not vary with the price of the goods. A revenue tariff was a set of rates designed primarily to raise money for the government. A prohibitive tariff was one that was so high that most importers would be discouraged from importing any of that item. A
protective tariff was intended to artificially inflate prices of imports and protect domestic industries from foreign competition. An environmental tariff, also known as a ‘green tariff’ or ‘eco-tariff’, would be placed on products being imported from or being sent to countries with sub-standard environmental pollution controls.
Because tariffs caused an increase in prices, the buying power of consumers was reduced and producers in other industries sell less. Consequently, the economy could decline and jobs could be lost.
Mr Marais commented that this document was belated, and it was something that should have been presented at the beginning of the year, so that the Committee could understand why jobs were created and lost. However, it did serve the purpose of giving Members a basic understanding of trade issues in order to better understand the Committee’s work.
Trade strategy: International Trade and Economic Development (ITED) Unit: Department of Trade and Industry (dti) presentation
Mr Xavier Carim, Deputy Director-General: International Trade and Economic Development (ITED), dti, stated that the Trade Strategy document that he had tabled was not an attempt to answer every question related to trade. The document reviewed the ingredients for growth and success in a changed global economy, and showed that
ITED had adopted a strategic approach to tariff reforms that supported industrial and employment objectives. An evidence-based, case-by-case assessment would inform changes to tariffs. Tariffs on mature upstream input industries could be reduced or removed, to lower the costs for downstream, labour creating manufacturing. By way of contrast, tariffs on downstream industries with employment potential would be retained to ensure sustainability and job creation.
The trade strategy was based on the premise of a global economy that was supportive of development that was in the interests of
Future trade policy work was focused on clarifying trade related issues such as services, investment, intellectual property, procurement, labour, and environment. Links would be elaborated between trade reform and measures to cushion costs. Institutional arrangements for trade policy making would be strengthened. The Cabinet input of 2009 and NEDLAC comments of February 2010 were being accommodated in the formulation of the strategy document, and ITED was hoping to meet the Cabinet deadline of April 2020.
Mr Marais wanted to know what the Committee could do regarding the many transgressions on WTO rules and regulations.
Mr Carim explained that some of the approaches adopted in the strategy document were not applicable to every detail and question. He noted that there was a need to be clear on transgressions. Subsidies were defined. Looking at the history of the agreements, it could be seen that they were negotiated in such a way that they covered subsidies that developing countries were now using. That was when ITED began to find inequity across such agreements. He cautioned that there was a need to be careful about saying that there were “transgressions”.
Mr X Mabasa (ANC) enquired why commodities dominated South African exports, except in African markets. He further wanted to know if the country was marketed thoroughly inside, so that people could buy local produce adequately.
Mr Carim replied that these issues were based on generalisations on how
Ms Hajaig asked for dti’s views on tariff liberalisation, taking into account trade policies of
Mr Carim elaborated that
The Chairperson questioned how the WTO regarded support in terms of developmental finance.
Mr Carim responded that this needed a proper legal assessment, but there were trade agreements in WTO about preferential loans. It all depended on how these were structured, as that was still a grey area in WTO. ITED had managed to stave off those challenges.
Ms Kotsi wanted to know what South Africans had learned from the agreement between
Mr Carim replied that a Memorandum of Understanding was signed with
Mr B Radebe (ANC) enquired about the view of the Department on the issue of exchange rates that seemed to hurt
Mr Carim explained that the exchange rate issue was something IPAP 2 highlighted, and that it encouraged imports. The approach that was adopted necessitated that
Mr N Gcwabaza (ANC) wanted to know the rationale behind liberalisation, and what was achieved by it.
Mr Carim replied that the South African manufacturing industry was high cost, competitive and highly protected, and that was caused by years of sanctions. In order to integrate it into the global economy, it had to liberalised. Liberalisation in
The meeting was adjourned.
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