A report, written by XA Global Trade founder Donald MacKay, said fewer and fewer companies were applying to the trade regulator, the International Trade Administration Commission (ITAC), which was completing fewer cases now than when it began operating in 2003. Only 42 cases had been finalised in the past five years, compared to 136 between 2003 and 2008.
The first reason companies were reluctant to apply for import duties was the amount of time it took for an investigation to be completed.
“In 2003, it took an average of 8 months to complete an investigation but in 2023 it takes 28 months. In 2003, the oldest open investigation was 33 months old and in 2023, the oldest was 57 months old. In March 2024, that investigation will turn five years old,” XA said.
The second reason was the “reciprocal agreements” companies had to agree to in return for tariff approvals. MacKay has said previously that these agreements have become a normal part of tariff investigations and that trade minister Ebrahim Patel refers to the system as “a bring and braai”.
In this tariff report, MacKay said the reciprocal agreements (also known as irrevocable undertakings) were too intrusive.
“These are contracts companies have to sign requiring them to make three-year commitments for employment, investment, training and price controls.
“Now a local procurement requirement has been added, required even when no local producer yet exists. In such a case, the applicant is expected to commit blindly to a future potential producer. The State has now become the sales force of future manufacturers. This moves them from regulator to market participant,” MacKay said.
MacKay concluded that the government’s “heavy handed interventions” in the market were causing measurable harm, and that the harm would increase.
