Exclusive: Thou­sands of paint in­dus­try jobs at risk

Chaos over im­port du­ties

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

THOU­SANDS of jobs and the fu­ture ex­is­tence of South African based paint man­u­fac­tur­ers are at risk be­cause of a gov­ern­ment de­ci­sion to ne­go­ti­ate the abo­li­tion of Chap­ter 39 im­port du­ties, specif­i­cally resins, from the East African Com­mu­nity (EAC) and Egypt.

The abo­li­tion of the du­ties is linked to the es­tab­lish­ment of the Tri­par­tite Free Trade Area (TFTA), which rep­re­sents an in­te­grated mar­ket of 26 coun­tries. South Africa signed the agree­ment in July this year.

Deryck Spence, the ex­ec­u­tive di­rec­tor of the SA Paint Man­u­fac­tur­ing As­so­ci­a­tion (Sapma), which rep­re­sents nine man­u­fac­tur­ers who ac­count for 90 per­cent of the paint prod­ucts pro­duced lo­cally, said the abo­li­tion of the du­ties was a threat to the sur­vival of the do­mes­tic paint man­u­fac­tur­ing in­dus­try and the jobs it pro­vided.

No con­sul­ta­tion

Spence said the de­ci­sion to ne­go­ti­ate the im­port du­ties was made on the rec­om­men­da­tion and en­dorse­ment of the Na­tional Eco­nomic De­vel­op­ment and Labour Coun­cil (Ned­lac) with­out any con­sul­ta­tion with the coat­ings in­dus­try or Sapma.

He said a thor­ough eco­nomic im­pact study was also not con­ducted to de­ter­mine how the re­moval of the du­ties on resins would af­fect lo­cal man­u­fac­tur­ers, who were also not con­sulted.

Spence said Sapma was ad­vised by the department of trade and in­dus­try (dti) di­rec­tor-gen­eral Lionel Oc­to­ber the ne­go­ti­a­tions were “too far gone” and the dti could not pull out of them.

Spence said the sit­u­a­tion was made worse by the fact that Egypt, as a mem­ber of Opec, en­joyed cheap prices for sol­vents, labour costs that were sig­nif­i­cantly lower than in South Africa and the Egyp­tian gov­ern­ment pro­vided $2.4 bil­lion (R31.38bn) in ex­port sub­si­dies that al­lowed their ex­porters to land prod­ucts in South Africa at prices lower than the man­u­fac­tur­ing costs of do­mes­tic pro­duc­ers.

Level fields

“The South African coat­ings in­dus­try is not against com­pe­ti­tion from other coun­tries since nearly R1.2bn of fin­ished prod­uct was im­ported into South Africa in 2016. What we do how­ever ex­pect is level play­ing fields and that im­porters are sub­jected to the same re­quire­ments, leg­is­la­tion and reg­u­la­tions as lo­cal pro­duc­ers.

“The coat­ings in­dus­try finds it to­tally un­ac­cept­able that Ned­lac and the dti are mak­ing de­ci­sions that are detri­men­tal to the man­u­fac­tur­ing sec­tor of South Africa at a time when the only so­lu­tion to the eco­nomic tragedy that South Africa has be­come is the sup­port and growth of lo­cal man­u­fac­ture and em­ploy­ment and not driv­ing our man­u­fac­tur­ing base off­shore,” he said.

Oc­to­ber, in a let­ter to Sapma in Busi­ness Re­port’s pos­ses­sion, said the tar­iff ne­go­ti­a­tions with the EAC were at an ad­vanced stage, with an agree­ment deemed im­mi­nent.

He said Sapma’s rep­re­sen­ta­tions to the department, to­gether with other in­puts and factors, would be taken into ac­count and ef­forts made to en­sure com­men­su­rate and eco­nom­i­cally mean­ing­ful mar­ket ac­cess for paint and other prod­ucts.

But Oc­to­ber stressed that the ne­go­ti­a­tions with Egypt could not sim­ply be called off, be­cause they were part and par­cel of the TFTA agree­ment.

Oc­to­ber said the South African gov­ern­ment did not have mea­sures at its dis­posal to curb the “un­fair ad­van­tages” that ac­crued to the Egyp­tian man­u­fac­tur­ers due to the sup­port they al­legedly re­ceived from their gov­ern­ment.

How­ever, Oc­to­ber said the man­date of the In­ter­na­tional Trade Ad­min­is­tra­tion Com­mis­sion (Itac) was, among oth­ers, to in­ves­ti­gate al­leged un­fair trade prac­tices and in­sti­tute mea­sures to level the play­ing fields.

Oc­to­ber said these in­stru­ments were also given ex­pres­sion in the TFTA Agree­ment and ad­vised Sapma to con­tact Itac for as­sis­tance.


Spence said one of its af­fected mem­bers had con­tacted Itac re­gard­ing the un­fair or non­level play­ing fields and Sapma would con­tinue to pur­sue this av­enue.

“But surely as a gov­ern­ment department, which has been specif­i­cally de­signed to han­dle im­port du­ties and un­fair dump­ing and pric­ing mat­ters in our mar­ket, Itac should have been con­sulted by Ned­lac for their in­put… be­fore a de­ci­sion was made by Ned­lac that could af­fect fu­ture jobs,” he said.

Ned­lac spokesper­son Tidi­malo Chuene failed to re­spond to spe­cific ques­tions by Busi­ness Re­port other than to state that the mat­ter had been re­ferred to Busi­ness Unity South Africa (Busa).

Olivier Ser­rao, di­rec­tor of eco­nomic and trade pol­icy at Busa, con­firmed the mat­ter had been re­ferred to them about six weeks ago by Ned­lac.

Ser­rao said Sapma was not a di­rect mem­ber of Busa, adding Busa con­sulted di­rectly with its mem­ber as­so­ci­a­tions and it was up to them to con­sult with their di­rect mem­bers.

Dei­dré Pen­fold, the ex­ec­u­tive di­rec­tor of the Chem­i­cal and Al­lied In­dus­tries’ As­so­ci­a­tion (Caia), said all their alerts and com­mu­ni­ca­tion was sent to all their mem­bers and the op­por­tu­nity was there for Sapma to pro­vide in­put.

Pen­fold said five Sapma mem­bers re­sponded di­rectly to Caia and these com­ments, to­gether with com­ment re­ceived from other sec­tors, was con­sol­i­dated and sub­mit­ted to Ned­lac.

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