South Africa’s cement industry is potentially facing an improved operating environment this year and in the future.
- The acceptance by the International Trade Administration Commission (ITAC) in December 2020 of an application from the industry for a sunset review of the import tariffs imposed on cement from Pakistan five years ago;
- The finalisation of an application first submitted to ITAC in August 2019 by The Concrete Institute (TCI), on behalf of the industry, for “safeguard action” against cheap cement imports, particularly from countries such as China and Vietnam; and
- Ongoing engagements between South Africa’s cement industry and the Department of Trade and Industry and Competition (DTIC) about the special designation of South African-produced cement for use in government infrastructure projects.
ITAC communications manager Thalukanyo Nangammbi confirmed the commission initiated a sunset review of the anti-dumping duties on cement originating in or imported from Pakistan through Notice No. 718 in Government Gazette No. 43986 on December 11, 2020.
“In terms of the commission’s anti-dumping regulations, the existing anti-dumping duties will remain in place pending the finalisation of the sunset review investigation. The investigation has to be completed within 18 months of the date of the initiation of the investigation,” he said.
Nangammbi added the commission has not received any other application for trade remedy action from the Southern African Customs Union (SACU) cement industry.
However, The Concrete Institute MD Bryan Perrie said this week said this application was submitted quite a long time ago and ITAC has come back to the TCI with a number of deficiency letters stating that it needs more information.
“My understanding is that the final information was submitted just before Christmas, but I don’t have any confirmation of that,” he said.
In regard to the sunset review application related to cement imported from Pakistan, Perrie said that depending on the findings of the ITAC investigation, the import tariffs may be increased, reduced or taken away.
Construction market intelligence firm Industry Insight reported in December 2020 that a total of 679 744 tons of cement with a customs value of R482 million was imported into South Africa in the nine months to September 2020, compared with the 1 025 616 tons valued at R502 million in the corresponding period in 2019.
Cement imports in 2019 increased year-on-year by 11%, following the 84% increase reported in 2018.
Industry Insight said cement imports from Vietnam accounted for 69.8% or 474 474 tons of the total 679 744 tons of cement imported into South Africa in the first nine months of 2020, with Pakistan accounting for 30% or 204 365 tons.
Designation more important
Perrie confirmed the TCI was working with the DTIC on the designation of cement for government infrastructure projects.
“We have had discussions with them and they came back to us and asked us for information, which we provided. It’s been backwards and forwards. It’s not just the DTIC but Treasury as well [that is involved],” he said.
Perrie stressed the designation of South African-produced cement has become more important because of the government-planned infrastructure investment plan.
The government in July 2020 unveiled 50 Strategic Infrastructure Projects (SIP) and 12 special projects, involving a total investment of R340 billion, as the first tranche of a massive infrastructure expenditure programme to drive the post Covid-19 economic recovery effort.
Attempts to obtain comment from the DTIC about the status of the cement designation engagements with the industry were unsuccessful.
The right thing to do
Peregrine Capital executive chair David Fraser said that if South Africa is to have a cement industry, it is clear the industry needs some anti-dumping protection.
Fraser said it has undoubtedly been testing for the industry to respond to upswings in demand because the current returns do not warrant further investment.
He added it is difficult to see any reinvestment, expansion and maintenance of cement capacity in South Africa while the investment returns are not there because of low prices, but this will flow naturally when the industry can make a decent return on its investment.
Fraser also had a bone to pick with the government about the way carbon tax is applied to the cement industry.
“There has not been any import duty related to the carbon tax. How can you possibly tax local producers but importers get in tax free without any carbon tax?
“That just makes no sense, doesn’t achieve any objective and is something that also needs to be addressed,” he said.
Fraser said the possible designation of South African-produced cement would obviously be positive for the industry and makes absolute sense.
“You want to try and keep as many jobs locally and try and use as much local goods in government procurement as possible. It’s not unique. Everyone is trying to look after themselves a little bit better, particularly during Covid-19 times.
“At the end of the day you want to make sure the spend of the government is targeting to benefit the South African economy and South African people to get the multiplier effect from wages, transport and all sorts of ancillary things that the companies procure themselves.
“By buying imported cement you are clearly not and are clearly benefitting cement kilns around the world and not locally. So it just is the right thing to do on so many levels,” he said.