South Africa’s coatings sector has warned the government that its future existence will be threatened by allowing African paint, polymers and coatings producers to export products into the country duty-free in terms of the African Continental Free Trade Area (AfCFTA) agreement.
SA Paint Manufacturing Association (Sapma) chair Sanjeev Bhatt said on Tuesday the sector was shocked to discover that on a few specific tariff headings these product lines could be imported free of customs duty effective from July this year.
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Bhatt said the sector was previously assured by the Department of Trade, Industry and Competition (dtic) that the domestic coatings sector would be protected and ring-fenced on certain tariff headings in terms of the AfCFTA agreement.
He said this was to prevent coatings and associated raw material imports from the likes of Egypt, which is a prolific producer, into South Africa duty-free.
Bhatt said the coatings sector was expecting protection from a deluge of cheaper, and often inferior, paint and polymer products being dumped in South Africa.
Tariff listings mysteriously ‘altered’
However, he said it appears that – without any consultation with the SA coatings sector or Sapma – the AfCFTA agreement tariff listings were altered to allow African producers to be exempt from duties when offering their products to the South African market.
“Such unfair competition would not only threaten sustaining the quality of coatings sold in South Africa – probably at much lower cost – but virtually shut down the local coatings industry with huge job losses,” said Bhatt, adding that the sector provides direct employment to more than 15 000 people.
He said Sapma stumbled upon the scrapping of import duties for the rest of the African coatings market by chance when going through an update of new tariff headings.
Bhatt said he wrote an official letter to the chemical desk at the dtic and asked it to enlighten Sapma on where this zero duty listing stemmed from but “funnily enough, they were not aware of it either”.
“When I queried [it] … the dtic and Itac [International Trade Administration Commission] confirmed they are currently investigating where this directive came from.
“Currently they have still not got back to us on how it was implemented. It’s a mystery to us right now,” said Bhatt.
“It’s a bit sad and unfortunate that nobody in these departments is aware of something that has been implemented and signed off by the minister.
“Is it a mistake? Was it done knowingly? These are the answers we are all looking for.”
A list of questions was emailed to both the dtic and Itac.
No response has been received from the dtic as yet, but Itac communications manager Thalukanyo Nangammbi said the commission is not aware of any discussions with Sapma in terms of establishing which directive led to the proposed duty structure under the AfCFTA agreement.
“These free trade agreements reside within the realm of the dtic,” he said.
“On 6 September 2022, Sapma only engaged Itac regarding the provision of an update on the creation of rebate facilities for titanium dioxide used in the manufacture of, among others, paints, varnishes and prepared driers.”
Responding to a question about protecting consumers from inferior imports, Nangammbi said this issue resides within the ambit of the National Consumer Council (NCC) and perhaps, with the imposition of standards, by the SA Bureau of Standards (SABS), which also resides outside Itac’s domain.
“However, any industry that experiences material injury as a result of dumped imports may approach the commission and submit substantiating evidence, which will be investigated by the commission,” he said.
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Bhatt said the employment and energy rates that some African governments, such as Egypt, grant their manufacturing sectors make production costs in those countries much lower than in South Africa.
He added that Sapma members already pay millions of rands in import duties to obtain essential feedstock, such as titanium dioxide and TOFA (tall oil fatty acids), because none of these vital components is produced locally.
“Disruptions in electricity supply, crumbling infrastructure and inefficient management of parastatal entities are also major burdens for the coatings and all other industries in South Africa.
“Now the coatings sector is expected to compete against the entire African coatings market on a totally unfair basis,” said Bhatt.
“If these cheaper imports from Africa are allowed to flood the South African market, the local coatings manufacturing sector will suffer serious economic consequences and ultimately cease production.
“Dumping of cheap paint and polymers at our ports will almost certainly follow, if not remedied or rectified.
“This must not be allowed to happen.”
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