State cuts tariffs on some steel imports

Linda Ensor and Carli Lourens

CAPE TOWN — Government has scrapped the 5% import tariff on certain steel and stainless steel products with immediate effect as one of its first measures to stamp out import parity pricing.

Tariffs on goods in other sectors engaged in this form of uncompetitive pricing, which bases local prices on the price of imported goods, would also be abolished, said Trade and Industry Minister Mandisi Mpahlwa in his budget speech to Parliament yesterday. This was part of a strategy to bring down the cost of key manufacturing inputs.

The two forms of steel are mainly used in car exhaust systems and in the making of vehicle bodies.

And, as a short-term measure to help the ailing clothing and textile industry, he also announced a two-year extension of the duty credit certificate scheme, which expired last year.

The cabinet has approved a package of measures to abolish import parity pricing, which acts as a constraint to the downstream beneficiation of raw materials.

Legislation will be amended to ensure that antidumping and countervailing duties are not used to inhibit import competition in import-parity priced commodities.

The minister will have the discretion in dealing with antidumping applications in industries where import parity pricing is practised.

Conditions will be imposed on future fiscal support by government or public entities.

Recipients will have to adopt non-discriminatory pricing between the domestic and export markets.

Also, government will develop a pricing and procurement framework for state-owned enterprises that “links their pricing and procurement practices to market behaviour of strategic input industries”, Mpahlwa said.

The Competition Act would be strengthened to introduce a price and cost monitoring function to allow the minister to designate industries and firms that would be required to provide audited information on their costs and pricing on an ongoing basis.

The minister would also be empowered to investigate and take proactive steps against uncompetitive practices.

Downstream beneficiation incentives would be introduced to help develop sectors such as metal fabrication, machinery and equipment and plastics.

Mpahlwa told a media briefing before his speech that the growth of downstream industries could create about 379000 jobs by 2014.

He urged the Industrial Development Corporation and the Public Investment Corporation to use their shareholding muscle to promote the phasing out of import parity pricing.

With regard to clothing and textiles, the minister said the tradability of duty credit certifications had been partly responsible for the flood of cheap Chinese imports.

This would be allowed to continue in the Southern African Customs Union until the end of this month, but thereafter it would be restricted to manufacturers until end March next year.

Meanwhile, Africa’s largest steel maker, Mittal Steel SA, has warned that the elimination of the 5% duty on imported steel may open the door to dumping.

The steel maker said yesterday that it was disappointed with the decision — the duty was already one of the lowest in the developing world, the company said.

Though “very small”, the duty acted as a psychological deterrent against dumping, it said.

Highveld Steel & Vanadium head André de Nysschen said the move was unlikely to have a significant effect on prices.

An analyst, who did not want to be named, said the average price of imported steel was about R3000 a ton and the 5% duty would translate into only about R150. He doubted that the elimination of the duty would prompt a significant switch to imports.