DONALD MACKAY: Billions lost because of delays in decisions on customs duty

You have to wait almost two years in most cases for an import duty change to be implemented in SA. That’s a long time compared with the four to six months that tariff investigations should take; four months for industries in distress and six months for the rest, according to the International Trade Administration Commission (Itac). 

In reality, if you apply for a duty increase it will take Itac about 10 months to complete its investigation and another 11 months for it to be approved by the ministers of finance and trade, industry & competition. Itac will wrap up a duty reduction or rebate investigation in three months, but then it will sit with these same two ministers for another 12 months before being implemented.

All of this means that if the investigations were completed on time the government could have collected another R1.25bn in import duties (assuming all of the duty increase applications succeeded) and another R2bn would be put back into the economy because of duties being collected, where there is no local production (again this assumes the decision to remove the duties would have succeeded). Instead, they stall.

Anti-dumping investigations have to be completed in 18 months or they terminate automatically. Last year, an anti-dumping investigation into frozen chips from Belgium and the Netherlands went past the 18-month deadline and was terminated.

In 2020, another case (float glass from Saudi Arabia and the UAE) similarly ran past the 18-month cut-off for three of the four products included in the scope of the investigation, but the importers and producers said nothing. They swallowed the bitter pill of their anti-dumping duties and shut their businesses in SA. More than a few people lost their jobs.

Despite the advertised urgency about everything trade policy related, little actually happens. Applications are brought, they disrupt the market and then ... nothing. Wait. Maybe you forget about it, and then two years later you suddenly face a duty increase. Ironically, our policies resemble Donald Trump’s, but with the lack of urgency only SA can muster.

Economist Milton Friedman, whatever you think of him, was on the button when he said: “One of the great mistakes is to judge policies and programmes by their intentions rather than their results. We all know a famous road that is paved with good intentions. The people who go around talking about their soft hearts. I admire them for the softness of their hearts, but unfortunately it very often extends to their heads as well. Because the fact is that the programmes that are labelled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have.”

Given that trade policy is seen as part of industrial policy, and industrial policy is cited by the government to save us from the triple evils of poverty, unemployment and inequality, why do these decisions take so long? I have no idea, but here are some possibilities worth considering:

• Reciprocal agreements arrived a short while after the departments of trade & industry and economic development were merged and Ebrahim Patel emerged as the boss of them both. The reciprocal agreements require applicants for any type of trade intervention to agree to be bound to an agreement that manages investment, job creation, price control and training investment. I assume many companies only reluctantly agree to sign this document, so there is probably some umming and aahing before agreement is reached. If the companies are listed there are some interesting questions to consider around JSE listing requirements and commitments to price controls. Some companies refuse to sign the agreements, and it could be that some of the delays are caused by the fruitless haggling.
• There is also confusion as to the finance minister’s role. When Malusi Gigaba was in that post he went to court twice to defend his right to chill and take a long time to make up his mind up about implementing duties. The court found in his favour, so it could be that the new minister is deeply considering each matter. Though this is possible, the National Treasury recently got its knickers in a knot when Patel sent over his request to extend a safeguard duty a day before the duties were to expire.
• There could also be an element of good old SA “slapgatedness” (a new word, but you know what I mean). Maybe it’s the case that nobody is able to make a decision because they are too incompetent to do so, don’t care, or are simply paralysed by the weight of the decision. Everyone is safe as long as no-one blinks first.

Whatever the reason, decisions are not made. The inertia runs like honey on a cold day through everything, and inertia equals uncertainty and uncertainty gums up the works. It stops investment, and heaven knows we need investment.

Yet this is a problem that is easily solved. Most of the overdue investigations have been completed by Itac, and their recommendations are with one of the ministers. All these ministers need to do is make a decision. Not a speech or a promise. Just a decision.

Decisions are quiet things of tremendous power, and just like that a lot of capital can be put into the economy. Some additional money is collected by the SA Revenue Service. Certainty returns and maybe someone invests some of that money and employs a few people. Everyone gets on with doing business. Imagine that.

• MacKay is CEO of XA Global Trade advisers.