International Trade and Administration Commission (ITAC) on their 2014/15 Annual Report

Economic Development

03 November 2015
Chairperson: Mr A Cele (ANC) (Acting)
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Meeting Summary

The International Trade and Administration Commission (ITAC) presented its annual report for 2014/15, and said the number of applications for domestic protection had increased due to the poor economic conditions. It had had to defend itself in court more often, due to this increase in applications and rulings.

ITAC had provided 10 training programmes, and had obtained an unqualified audit report, which indicated that there had been no wasteful and fruitless, or irregular, expenditure in 2014/15. Anti-dumping investigations were under way for cement and wheelbarrows. Anti-dumping duties had been imposed for soda ash and frozen bone-in portions of chicken. Safeguards had been implemented for frozen potato chips.

During 2014/15, 18 454 import permits had been issued against a target of 13 500. Export permits issued had been 14 181 against a target of 7 500. ITAC’s total revenue had amounted to R86.9 million, and expenditure had been R84.1 million, resulting in a surplus of R2.6 million.

The main discussion points were around capacity at ITAC, the role of China in relation to trade with South Africa, the involvement of small and medium enterprises (SMEs), protection for steel manufacturers, and the McCain Foods case. China was being watched intently for dumping tendencies. SMEs did not play a major role, but gained from the impact of their association with larger players. In the McCain Foods case, the recommendations had been given to the Minister who had decided to go with safeguards rather than anti-dumping measures, due to European agreements. The last eight applications around steel protection would be finalised by the end of November.

ITAC was severely under-capacitated in the areas of investigations and legal work, and needed human resource support. 

Meeting report

Briefing by International Trade and Administration Commission (ITAC)

Mr Siyabulela Tsengiwe, Chief Commissioner, ITAC, presented on the annual report for 2014/15. Economic conditions had been tough internationally and locally, and ITAC had witnessed increasing applications for support by domestic producers. In 2014/15, there had been nine individual product tariff increases. During the period 2003-2008, there had been a decrease in domestic tariffs due to good economic conditions. After the crisis in 2008, there had been an upward trend in tariff increases. ITAC had been flexible and adaptable during its 12 years of existence. Turnaround times had been met, except for customs tariff increases. There were winners and losers in this field, as it impacted the bottom line of firms. ITAC had had to defend its actions in court and was doing well in this regard.

Steel investigations were still underway. The verification of financial and product information had been conducted by ITAC on 21 September 2015. The preliminary findings had been presented to the Commission on 13 October 2015. It was in the process of being finalised. On galvanised/coated and painted steel, the relevant amendment of the 10% tariff had been implemented on 25 September 2015. Certificates under the Motor Industry Development Programme (MIDP) and Automotive Production and Development Programme (APDP) had been issued. Anti-dumping investigations were under way for cement and wheelbarrows. Anti-dumping duties had been imposed for soda ash and frozen bone-in portions of chicken. Safeguards had been implemented for frozen chips.

During 2014/15, 18 454 import permits had been issued against a target of 13 500, mainly around marine resources, mineral fuel and oils, chemicals, rubber and tyres, metals, capital goods and automotives. Export permits issued had been 14 181, against a target of 7 500. ITAC had published guidelines in terms of which ferrous and non-ferrous waste and scrap had to be offered to local consumers for a period of 15 working days at a price preference calculated by ITAC monthly. These controls were beginning to have a positive impact on domestic merchants and consumers.

 

The vacancy rate of ITAC was only 4.6%. As at 31 March 2015, ITAC had 125 employees. It had provided 10 training programmes. 15 interns had been on its internship programme, and 13 of these had received employment. The ITAC core business was comprised of 70 employees, while support services made up the balance of 55 employees. The workforce was diversified in terms of gender and race.

Ms Lebogang Bogatsu, Finance Manager for ITAC, said that ITAC maintained effective internal controls that reduced risk and helped the organisation to meet its objectives. These controls had been reviewed by an internal audit and other committees. The Audit Committee (AC) had met four times in the year and had had one special meeting, and had found that the financial reports and internal controls had been effective, efficient and transparent.

ITAC had obtained an unqualified report in 2014/15. There had been no wasteful and fruitless expenditure and no irregular expenditure. It was addressing the issues raised by the Auditor General (AG). Total assets were R35.4 million and total liabilities were R11.3 million. ITAC’s total revenue had amounted to R86.9 million, of which 98% was grant money and 2% interest received. Expenditure had been R84.1 million, representing a surplus of R2.6 million. 80% of the expenditure had been related to employee costs, and 19% to operating expenses. ITAC had managed to reduce costs in travel, workshops and advertising.

Discussion

Ms D Rantho (ANC) asked why some of the ITAC targets had been missed.

Mr S Tleane (ANC) commented that ITAC was working hard and had given a clean presentation. On the application of McCain Foods, why was the antidumping application withheld? On the company Careways – a little bit more information must be provided on this company. What had been the success rate of the bursary programme? For the AG, would the mechanisms be put in place prevent the weaknesses that had been mentioned in the presentation? In the year under review, scheduled and unscheduled inspections had been carried out -- what had been the outcome of these? Did the investigation team need greater capacity?

Mr I Pikinini (ANC) said issues had been raised by the AG around material misstatements. These issues of misstatements need to be tackled head on.

The Chairperson asked where the Chief Financial Officer (CFO) was. Did ITAC have enough capacity to handle the responsibilities of the organisation? What had been the legal costs, and was there enough capacity to handle litigation?

Mr M Mbatha (EFF) asked what the scale and magnitude of the work out there was, comparing SA to developing and developed countries. He wanted to allow small and medium enterprises (SMEs) to able to take advantage of the work that ITAC was involved in. Was there much SME involvement in this area? SA was always trying to justify and support Chinese actions, but its bully partner was doing what it could for itself and was not interested in SA at all. He was worried that China would find a way through the steel protection net. He was happy with the race and gender mix of ITAC and the bursary programme. The skills should be kept within SA.

Mr P Atkinson (DA) said that the steel industry needed to be protected locally. Two out of ten cases had been finalised regarding this protection. When would the outstanding eight be finalised?

Mr Tsengiwe responded that on McCain Foods and the chips, the safeguards implemented applied to all countries. ITAC had investigated the anti-dumping application against Netherlands and Belgium. They had given recommendations to the Minister, who had decided to implement safeguards instead of anti-dumping measures, due to European Trade agreements. The safeguards needed to run out before anti-dumping measures could be implemented. Anti-dumping measures stood for five years.

On the targets missed, the turnaround times had been reduced to six months. ITAC was struggling with the increase in tariff applications, as they were highly contestable. There were downstream effects of tariff increases to consumers and other domestic companies. These effects took time to resolve and investigate. With trade remedies, the investigations also took time, as ITAC staff needed to travel abroad to gather information.

On steel, ITAC needed to resolve the outstanding eight duties within four months. Two were complete. The remaining items would be finalised by the end of November this year. It was the big players that provided the necessary information about the market and financial data to ITAC. Industry associations also provided a lot of data. SMEs did not feature much but they did benefit from the bigger players. China was SA’s fiercest competitor, and ITAC was looking at the country’s intentions intently.

There was a need for organisational development at ITAC. There had not been a scientific study on what ITAC should look like. The demands on the organisation were increasing, including court litigation. The personnel numbers had remained static, which was a major challenge. There were five people responsible for investigations. They had been given a budget for another four positions, but with nine people they would be able to cover only about 20% of the cases. Ideally, all the scrap yards should be investigated. However, the resources were stretched. SARS also worked in this area.

The CFO was busy writing exams.

ITAC needed to beef up its capacity. There were only two positions dealing with legal costs -- they would welcome further capacity. The legal costs shown in the financials were based on the timing of the invoices.

Ms Lihle Mndebela, Senior HR Manager, ITAC, said that Careways was a service provider. It was a SA company and Black Economic Empowerment (BEE) compliant. providing health and wellness to the employees of ITAC.

The bursaries had been very successful -- the holders needed to provide good results for them to carry on receiving the funds. 25 employees in 14 disciplines were currently on bursaries.

Ms Bogatsu said that ITAC had an audit action plan to address the issues brought out by the AG. There was an internal audit that reviewed the action plan on a quarterly basis and there was an audit risk committee that also monitored the action plan.

Mr Marius Collins, Senior Manager, ITAC, said that ITACs export control responsibility was to administer the tariffs and investigate the incidents. It had no mandate to enforce any penalties for scrap metal theft. They did support SAPS in this area though. Unscheduled inspections took place when ITAC went to warehouses and opened crates and containers. If there was evidence of non-compliance, a case would be opened up with SAPS. Scheduled investigations were done by making an appointment with a company.

The meeting was adjourned.

 

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