Exclusive: Thousands of paint industry jobs at risk

Chaos over import duties

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 driv- ing 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.

Unfair

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.