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Annual Report (2012/2013) Presentation to the Portfolio
Committee on Economic Development
05 November 2013Siyabulela Tsengiwe
Chief Commissioner
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Contents
1. Introduction.
2. Key Strategic Objectives & Performance Areas &
Services.
3. Tariff Investigations.
4. Anti-Dumping Investigations.
5. Import and Export Control.
6. Corporate Governance.
7. Auditor General’s Report.
8. Financial Position & Performance.
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Introduction
• The year under review saw a rise in applications and approvals by the Commission for tariff support to domestic producers. This is due to the tough global economic conditions and cost pressures.
• In the context of the challenging global and domestic economic conditions, ITAC has to exercise flexibility in its administration of a developmental approach to trade policy.
• Tariff increases for 2012/13 were recommended on 10 products ranging from pasta and lawnmower blades to wind screens, whereas in the past five years on average, there were 3 product specific tariff increases.
• An application for an increase of duty on sardines was rejected by the Commission taking into account among others, the competitiveness position of the industry and consumers.
• There were only two tariff reductions on hydraulic brake fluid and alternators.• In addition a number of rebates have been recommended to reduce the cost of
production for manufacturers. The rebates include mechanisms for lever-arch files, set top boxes and petroleum bitumen.
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Introduction
• The Commission follows a developmental approach to tariff setting for both agricultural and industrial goods. It is neither a rigid blanket increase nor blanket reduction in tariffs. Tariffs are instruments of industrial policy. The Commission’s recommendations are evidenced based and conducted on a case-by-case basis. The focus is on the outcomes: increased domestic production, investment, job retention and creation, as well as international competitiveness.
• Seven new trade remedies were initiated in the past year on products ranging from potato chips and paracetamol to mirrors and hand tools.
• During the reporting period, 14 977 import permits and 6 982 export permits were adjudicated and issued.
• The past year saw an increasing demand for ITAC instruments. These demands had to be met without compromising on quality while simultaneously striving to meet the turnaround times. In this regard ITAC has in collaboration with EDD embarked on an organisational development project in order to remain effective into the future.
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Key Strategic Objectives, Performance Areas & Services
Ensure contribution to employment creating growth and development through
effective delivery of international trade instruments
International Trade Instruments
What will be pivotal in improving the provision of customs tariffs, trade remedies, and import and export control will be the quality
and turnaround times.
Customs Tariff Investigations[Increasing Duties, Reducing Duties, &
Creation of Rebates]
Trade Remedies Investigations[Antidumping, Countervailing & Safequards]
Import & Export Control[Permits & Enforcement]
Ensure organisational efficiency and effectiveness of ITAC
Business Support Services
oHuman ResourcesoFinance oInformation TechnologyoLegal ServicesoPolicy and Research
Ensure strategic alignment and continued relevance with the
Department of Economic Development and national
agenda
International Trade Technical Advice
ITAC will become more proactive in the provision of technical inputs
and contributions to trade and industrial policy implementation, as
well as trade negotiations at bilateral, regional and multilateral
levels.
Technical Inputs on Trade and Industrial Policy , including Sector
Strategies
Technical Inputs on Trade Negotiations
[WTO, SADC & SACU] ;
Bilateral Agreements [EU, EFTA, MERCOSUR, & INDIA]
The performance of the institution will be driven through appropriate business
solutions, efficient and effective utilisation of material, human and information technology resources.
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Tariff Investigations Completed During 2012\2013
APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT
Kaymac Geo-synthetic clay liners Free – 25% Increase
Uniresins (Pty) Ltd Alkyd resins Free – 15% Increase
Blue Ocean Mussels Mussels Free & 5.5c/kg – 25% Increase
Pioneer Foods (Pty) Ltd Uncooked pasta, not stuffed or otherwise prepared
30% - 40% Increase
ITAC Salmon & Trout Remain at 25% Increase
Foodcorp (Pty) Ltd Sardines in airtight containers Declined Increase
Grain SA Dollar based reference price - wheat In process Increase
Collier Tool & Die CC Lawn mower blades Free – 20% Increase
Ellies Holdings (Pty) Ltd Outdoor Aerials Free – 20% Increase
Peninsula Drums CC Conical drums Free - 15% Increase
ITAC Set top boxes Free - 15% Increase
Shatterprufe , USG Autoglass CC, FGW Safety Glass (Pty) Ltd & National Auto Glass (Pty) Ltd
Laminated automotive windscreens 15% - 30% Increase
Cobra Watertech (Pty) Ltd Taps and Mixers 15% - 20% Increase
RIC Manufacturing CC PTFE tape In process Increase
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Tariff Investigations Completed During 2012\2013
APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT
Jensen Belts Buckles, magnetic locks & studs for belts Declined Rebate
Paciwave (Pty) Ltd Fabric for bulk containers Declined Rebate
Bagshaw Footwear Leather for protective footwear Declined Rebate
Nyathi Textiles Fabric for impregnation or coating Declined Rebate
ITAC Worn overcoats Approved quota Rebate
Kiran Global Silica SA (Pty) Ltd Caustic Soda for Meta-silicates Approved Rebate
Bidvest Paper Plus (Pty) Ltd Mechanisms for lever arch files Approved Rebate
Department of Trade and Industry Rebate for Automotive Production and Development Programme – Rebate 317.03
Approved Rebate
GRW Engineering (Pty) Ltd) Certain parts for refrigerated trailers Declined Rebate
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Tariff Investigations Continued
APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT
Colas (Pty) Ltd Petroleum Bitumen Approved Rebate
ITAC Rebate 470.01 & 470.03 Approved merging rebates Rebate
ITAC Worn clothing for wiping rags Approved tightening of Guidelines Rebate
ITAC Rebate for Set Top Boxes to exclude populated PC Boards and other designated inputs
Approved Rebate
ITAC Tyres for organised motor sport & agricultural/ forestry vehicles & machines
Approved Rebate
Department of Trade and Industry
Temporary deeming of imported aluminium/ steel for the manufacture of wheels
Approved Rebate
ITAC Extension of the claiming period for Productive Asset Allowance programme to 2015.
Approved Rebate
EDD SKD manufacturing for Minibuses and Midi buses Approved Rebate
ITAC Claiming under the Productive Asset Allowance by component manufacturers, whereby the OEM transferred its project to participate under the Automotive Investment Scheme
Approved Rebate
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Tariff Investigations Continued
APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT
SABAC (Pty) Ltd Brake fluid Approved10% - free
Reduction
Giants Canning (Pty) Ltd White Pea beans Declined Reduction
General Mills Frosting Declined Reduction
Hudaco Trading (Pty) Ltd AC generators and alternators Approved5% & 10% - free
Reduction
Massmart Camp Chairs Declined Reduction
Divfood – subsidiary of Nampak Aluminium slugs Declined Reduction
Capco CC Mineral fibre ceiling tiles Declined Reduction
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Administration of MIDP & APDP
On 01 January 2013 the APDP replaced the MIDP. The APDP is a customs-based programme comprising a tariff component, production incentive (PI), volume assembly allowance (VAA) and automotive investment scheme (AIS). The AIS is administered by thedti. The objective of the APDP is to create an enabling environment for the domestic industry to significantly grow production volumes and local value addition, leading to the creation of additional employment opportunities across the value chain. Whereas the MIDP was export-oriented, the APDP is based on production.
thedti is the policy making authority for the MIDP/APDP & ITAC administers the program.
Certificates issued under the MIDP:Import Rebate Credit Certificates (IRCCs) – 2010Heavy Commercial Vehicle (HCVs) - 63Eligible Export Certificate (EECs) - 68Productive Asset Allowance Certificate(PAAs) – 50
• Certificates issued under the APDP:Eligible Production Certificates (EPCs) – 80
MOTOR INDUSTRY DEVELOPMENT PROGRAM (MIDP)AUTOMOTIVE PRODUCTION AND DEVELOPMENT PROGRAM (APDP)
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Anti-Dumping Investigations
Product Country Applicant Type Status and Duties
Potato chips All McCain foods Safeguard In progress
Unframed mirrors PRC PFG Anti dumping Duties imposed
ORIGINAL INVESTIGATIONS
Product Country Applicant Type Status and Duties
Picks, spades and
shovels
PRC South African Fasteners
Manufactures’ Association
Sunset Review In progress – Commission made
final determination
Paracetamol PRC Anqui Luan New shipper Review Duties against exporter withdrawn
PVC rigid PRC Arengo 190 (Pty) Ltd Sunset Review Duties maintained
Product Country Applicant Type Status and Duties
PVC rigid PRC Arengo 190 (Pty) Ltd Exclusion from payment of AD
duties
In progress
EXCLUSION
REVIEWS
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Anti-dumping investigations
Product Country Applicant Type Initiation date Outcome
Frit Brazil Ferro Industrial Products (Pty) Ltd Anti-dumping 23/09/2012 Duties imposed (15/02/2013)
Threaded screws PRC South African Fasteners
Manufacturers Association
Anti dumping 18/11/2012 Duties imposed (16/11/2012)
Threaded rods PRC South African Fasteners
Manufacturers Association
Anti-dumping 23/09/2013 No duties imposed
Frozen Chicken Brazil Southern African Poultry
Association
Anti-dumping 24/06/2011 No duties imposed
ORIGINAL INVESTIGATIONS CARRIED FROM PREVIOUS YEAR
Product Country Applicant Type Status and Duties
Frozen chicken USA Southern African Poultry
Association
Sunset Review 24/06/2011 AD duty maintained
Unframed mirrors Indonesia PFG Sunset Review 23/09/2012 AD duty maintained
Clear float glass Indonesia PFG Sunset Review 20/04/2012 AD duty maintained
SUNSET REVIEW INVESTIGATIONS CARRIED FROM PREVIOUS YEAR
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Import and Export Control
During 2012/2013 import permits issued amounted to 14 977. The target was 13 000.Majority of the permits were for the following imported products:
Marine ResourcesMineral fuels and oilsChemicalsRubber and tyresMetals Mechanical AppliancesAutomotives
IMPORT PERMITS ISSUED
EXPORT PERMITS ISSUED
Chapter Description Permits Issued Chapter Description Permits Issued
26 Ore, slag and ash 8 75 Nickel waste and scrap 10
27 Mineral fuels 341 76 Aluminium waste and scrap 576
28 Inorganic chemicals 736 78 Lead waste and scrap 168
29 Hydrocarbons 889 79 Zinc waste and scrap 61
30 Human blood 3 80 Tin waste and scrap 8
47 Paper waste 71 81 Other base metal waste and scrap 124
72 Ferrous waste and scrap 851 85 Waste and scrap batteries 27
74 Copper waste and scrap 674 87 Used motor vehicles 2 415
Export permits issued in 2012/2013 amounted to 6 962. The target was 7 000.
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Corporate Governance
• ITAC adheres to all applicable regulations governing the operations of public entities. The policies are developed to ensure effectiveness of corporate governance strategies in terms of applicable legislations or guidelines which are: PFMA; Treasury Regulations; PPPFA & relevant SCM regulations; King III Report; etc.
• ITAC maintains effective internal controls which are designed to ensure that risks are reduced or managed and that the organisation is able to meet its objectives. ITAC’s internal control measures include amongst others the risk management activities, internal audit activities, the relevant committees (Risk and Audit) and other internal governance structures.
• The internal controls are continuously monitored throughout the year by Management, Internal Audit and by other relevant Committees. All identified gaps are referred for correction to relevant officials.
COMPLIANCE & INTERNAL CONTROLS
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Corporate Governance Continued
• ITAC has an effective risk management function and conducts its risk assessment continuously and then present the risk register to the Risk Management Committee. The committee then refers those risks whose status has changed to the Internal Audit Unit to perform independent test of whether the Risk Register represent the true situation of the organisational risk.
• ITAC Executive Committee monitored the internal controls and relevant risk management processes for 2012/2013 year-end and is satisfied with their effectiveness.
• The Risk Management Committee played the role of reviewing the organisational risk and made recommendations for improvement on risk management activities to be implemented by management.
RISK MANAGEMENT
• The Audit Committee held 4 meetings in the year under review.
• According to the Audit Committee report:
The system of internal control applied by ITAC over financial risk and risk management is effective, efficient and transparent.
The Audit Committee is satisfied with the content and quality of monthly and quarterly reports prepared and issued by the Accounting Authority of ITAC during the year under review.
The Audit Committee is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to ITAC in its audit.
AUDIT COMMITTEE REPORT
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• ITAC did not incur any new irregular expenditure during the 2012/ 2013 financial year.
• Irregular Expenditure amounting to R193 815.00 was disclosed in ITAC’s 2012/2013 Annual Report. This amount relates to on-going contracts as per 2011/ 2012 AGSA audit which requires disclosure for payment made on these contracts for their full duration.
95% (R183 555) was for not specifying the criteria (preference points) for evaluation of the quotes. Though the criteria was not specified to service providers when requesting the quotes, the 80/20 evaluation criteria was in fact applied before appointing the successful service provider, and
5% (R10 260) relates to procuring services with less than three quotation.
• In 2012/2013, ITAC did not incur any fruitless and wasteful expenditure.
• The on-going irregular expenditure was condoned and notice was sent to National Treasury and AG’s Office as required by SCM regulation.
Auditor General Report
IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE
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• ITAC has developed an Audit Action Plan to address those findings reported only in Management Report to ensure that they do not escalate to the Audit Report level.
• Internal Audit Unit has been given the responsibility of evaluating the Audit Action Plan as part of its audit process to test whether the proposed or implemented actions will address the AG’s findings.
• The Executive Committee also plays a role of monitoring the implementation of the action plan.
OPINION OF AUDITOR GENERAL
• ITAC has obtained an unqualified opinion in 2012/ 2013 financial year with no material findings on compliance with laws and regulations; and predetermined objectives
IMPLEMENTATION OF AUDIT RECOMMENDATIONS
Auditor General ReportContinued
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Financial Position
• ITAC has a sound financial position as assets are more than its liabilities.
• ITAC’s total assets amount to R33.2 million and this figure consists of Cash and Bank- 90%, Fixed Asset-8% and Account Receivables-2%.
• ITAC’s total liabilities amount to R11.3 million and this amount consists of Provisions and Commitments for both Non Current Liabilities-37% and Other Current Liabilities-34%; and Account Payables-29%.
• The difference between ITAC’s assets and liabilities, R21.9 million relates to the Net Asset. This amount is a cumulative figure included in the AFS in line with GRAP standard for basis of preparation of AFS. It includes various financial years in which approval was granted to ITAC by National Treasury to retain surpluses for ITAC’s projects meant for its operational effectiveness.
FINANCIAL POSITION RESULTS - ASSETS AND LIABILITIES
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Financial Performance
• ITAC’s total revenue amounts to R76.3 million and 97% is EDD allocation, while 2% relates to interest received and 1% relates to other revenue.
• ITAC’s total expenditure amounts to R74.8 million and 74% of this expenditure relates to compensation of employees while 26% relates to Goods and Services, Depreciation and Other expense.
• ITAC had a surplus of R1.6 million in 2012/2013 and 80% of this relates to underspending on employees cost due to results of resignations during the year, including management & other low level staff. Other saving relates to few trips on international travel and legal fees of which payment is depended on finalisation of litigation that ITAC is involved in.
FINANCIAL PERFORMANCE RESULTS - REVENUE AND EXPENSES
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Thank You
Office Contact Details: 012 394 3713
Cell: 082 454 8979 [email protected]
www.itac.org.za