Key Takeaways:
- The renewable energy industry is calling for the scrapping or overhaul of the staged-consignments policy due to its exploitation by importers to avoid paying import duties.
- The policy allows importers to group components under a single duty-free tariff code, resulting in unfair competition and undermining local manufacturers.
- The industry argues that the policy is "fundamentally flawed" and is being used to import entire renewable energy projects without attracting import duty.
- The Department of Trade, Industry, and Competition, and the South African Revenue Service (Sars) are investigating allegations of abuse under the Customs and Excise Act.
- The industry wants the policy scrapped or reworked to include adequate safeguards to protect local manufacturers and promote job creation.
Introduction to the Issue
The renewable energy industry in South Africa is facing a significant challenge due to a "fundamentally flawed" policy administered by the South African Revenue Service (Sars). The staged-consignments policy, which allows imported goods to be delivered and cleared through customs in separate stages or shipments, is being exploited by importers to avoid paying import duties. This has resulted in unfair competition and undermined the government’s policy objectives on localisation and job creation. The industry is calling for the scrapping or overhaul of this policy, citing its negative impact on domestic manufacturers and the economy as a whole.
The Staged Consignments Policy
The staged consignments policy was designed to facilitate the importation of large projects, such as machinery or modular infrastructure, in separate stages or shipments. However, the industry argues that this policy is being abused by importers who group many, or all, components needed for renewable energy plants under a single duty-free tariff code. This allows excess equipment, beyond project requirements, to enter the local market duty-free, undercutting domestic manufacturers. The policy has become a loophole that importers are using to avoid paying import duties, resulting in a loss of revenue for the government and a decline in the competitiveness of local manufacturers.
Impact on Local Manufacturers
The impact of the staged consignments policy on local manufacturers has been significant. The industry argues that the policy has resulted in unfair competition, as importers are able to import goods without paying import duties, while local manufacturers are subject to tariffs and other costs. This has undermined the government’s policy objectives on localisation and job creation, as local manufacturers are unable to compete with cheap imports. The industry is calling for the policy to be scrapped or reworked to include adequate safeguards to protect local manufacturers and promote job creation. The government’s stated policy objectives on localisation and job creation are being undermined by the very policy that is supposed to support them.
Government Response
The Department of Trade, Industry, and Competition, and Sars have acknowledged the concerns raised by the industry and are investigating allegations of abuse under the Customs and Excise Act. A meeting has been held with key stakeholders, including Sars, the International Trade Administration Commission, and various industry associations, to discuss the issue. However, the industry is still waiting for concrete action to be taken to address the issue. The minister of trade, industry, and competition, Parks Tau, has stated that Sars retains the primary responsibility for investigating and addressing abuse related to staged consignments. The industry is calling for urgent action to be taken to address the issue and protect local manufacturers.
Conclusion and Recommendations
In conclusion, the staged-consignments policy is a "fundamentally flawed" policy that is being exploited by importers to avoid paying import duties. The policy has resulted in unfair competition and undermined the government’s policy objectives on localisation and job creation. The industry is calling for the policy to be scrapped or reworked to include adequate safeguards to protect local manufacturers and promote job creation. The government must take urgent action to address the issue and protect the interests of local manufacturers. This can be achieved by reworking the policy to include adequate safeguards, such as requiring importers to pay import duties on all goods imported, regardless of whether they are part of a staged consignment or not. Additionally, the government must ensure that Sars has the necessary resources and capacity to investigate and address allegations of abuse under the Customs and Excise Act. By taking these steps, the government can promote job creation, support local manufacturers, and ensure that the renewable energy industry is developed in a sustainable and equitable manner.