Archives For DTI

sars-edi-user-manualSARS has been operating Electronic Data Interchange (EDI) with its external stakeholders since 2001. More than 98% of all customs declaration (CUSDEC) transactions are today submitted electronically to Customs and the electronic submission of multimodal cargo reports (CUSCAR) is steadily increasing. Today, declaration processing is fully electronic end-to-end thanks to the availability of highly established EDI and Customs software service providers supporting the local customs and logistics community. SARS has also recently introduced a benefit for compliant cargo reporters who will be absolved of certain manual (paper) submission requirements once they attain an acceptable level of electronic submission compliance and data accuracy.

The ultimate objective is to ensure that all Customs-to-Business (C2B) transactions are electronic to enable full supply chain connectivity between the South African business community and Customs. This in turn enables the possibility of SARS accrediting or approving ‘supply chains’ as opposed to just individual trader segments (importers and exporters). The extent of electronic compliance is also a pivotal requirement for traders operating under the new Customs Control Act, to be enacted in the future.

SARS overall EDI capability extends further than declarations and cargo reports. In recent years Customs-to-Government (C2G) messaging has also been successfully established between SARS and the Department of Trade and Industry (dti) as well as the South African Reserve Bank (SARB). SARS is also engaging other government stakeholders concerning IT connectivity and data exchange.

Moreover, developments for cross-border Customs-to-Customs (C2C) data exchange are also in the pipeline and could come to fruition with the partner administrations in Mozambique and Swaziland in the foreseeable future. These initiatives will usher in increased supply chain connectivity through active use of the Unique Consignment Reference (UCR) between participating customs administrations. The ultimate objective here is the creation of mutual recognition benefits for local and cross-border traders based on their accreditation status agreed between the participating customs administrations.

The SARS Electronic Data Interchange (EDI) Manual (which can be downloaded from the SARS EDI webpage) has been updated with the latest versions of SARS Edifact Data Mapping Guides as well as improved diagrams explaining the functional composition of the various electronic messages specified for Customs processing. Also included are the requirements for registering as an EDI user with SARS.

The manual includes recent updates relating to cargo reporting (manifests) as well as the updated customs declaration message incorporating recent inclusion of customs surety, penalty and forfeiture requirements. The latter enhancement removes another document based requirement (the Form DA70 Provisional Payment) for Customs Brokers with the view streamlining data requirements, enhancing customs billing and customs status reporting with the trade and logistics community. This EDI Manual will be an important document over the coming months and years in that it will feature updated electronic requirements in support of the new Customs Control Act. Watch this space!

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nrcsThe National Regulator of Compulsory Specifications (NRCS), in its battle to protect the country from non-compliant goods whilst facilitating trade, advises that it intends rolling out a pilot programme aimed at cutting delays in the issuance of Letters of Authority (LOA).

The intention is to categorise risk, thereby ensuring that applications from compliant importers will be fast tracked i.e.: the letters of authority will be processed in 21 days or less. Companies in the ‘low risk’ category will, however, be subjected to heavy penalties should they not meet the requirements.

The proposal the NRCS intends presenting to the Department of Trade and Industry (DTI) will reflect three categories of risk: low, medium and high. It is expected that NRCS will rollout its pilot study in the last 6 months of the year, before officially launching the programme early next year. Companies earmarked to participate in the pilot study will be identified by mid-June. Source: Shepstone & Wylie Attorneys – Taryn Hunkin

Harrismith, Free State, South AfricaThe South African Cabinet has ratified a decision by the Department of Trade and Industry (DTI) to designate the Maluti-A-Phofung (MAP) logistics hub, in Harrismith, in the Free State, an industrial development zone (IDZ), further approving the granting of operator permit for this zone to the Free State Development Corporation.

The designation would result in the establishment of a logistics-orientated platform 10 km outside of Harrismith, primarily to service the automotive, light manufacturing, agro-processing, distribution and logistics sectors.

The Harrismith hub had become part of a key nodal point of the Durban–Free State–Gauteng Corridor, which was identified in the 2005 National Freight Logistics Strategy approved by Cabinet. According to the DTI, the MAP IDZ would become a multi-sector processing, manufacturing, engineering, logistics services, transport and logistics complex, serving the needs of the upstream value-adding, beneficiation, processing and production service companies operating across sectors and geographical areas in Southern Africa.

The zone would further look to provide efficient IDZ and customs-controlled area operations and processes that would facilitate timeous and cost-effective operations for international and domestic investors.

Dube Tradeport will be officially launched as an Industrial Development Zone (IDZ) by President Zuma on Tuesday 7 October.

At the launch event, the Dube Tradeport will officially be handed over an operator permit which provides them the status of an IDZ.

Situated at the Dube Centre, King Shaka International Airport, Durban, it was designated as an IDZ on 1 July 2014 by the Minister of Trade and Industry, Dr Rob Davies.

Davies says, “The Dube Tradeport IDZ will be launched during a period of transition wherein Industrial Development Zones as governed by the Manufacturing Development Act will become Special Economic Zones (SEZ) under the new Special Economic Zones Act 16 of 2014.”
According to Davies, the Act has been assented to by the President, and will come into effect before the end of 2014.

Davies adds, “The main areas that have designated as Dube Tradeport Industrial Development Zone (DTPIDZ) are Dube Agrizone and Dube Tradeport. Dube Agrizone is about 63.5 hectares and focuses on high-value, niche agricultural and horticultural products while Dube Tradezone which is 240.27 hectares focuses on manufacturing and value-addition primarily for automotive, electronic, fashion garments and similar high value, time-sensitive products and inputs.”

“The launch of the IDZ will highlight the continuous efforts by government to promote industrialisation and create awareness about the SEZ programme, and its potential to grow the economy and create jobs through creating a conducive environment for foreign direct investment.” Source: Transportworldafrica.co.za with images from dubetradeport.co.za.

imagesCA31PQJGThe Minister of Trade and Industry, Dr Rob Davies briefed the Parliamentary Portfolio Committee on Trade and Industry regarding the progress on the implementation of the five-point plan in Cape Town. This is a work programme which was approved by the 2nd Southern Africa Customs Union (SACU) Summit convened by President Zuma in 2011 premised on the following pillars;

  1. Work programme on cross-border industrial development;
  2. Trade facilitation;
  3. Development of SACU institutions;
  4. Unified engagement in trade negotiations and
  5. The review of the revenue sharing arrangement.

The five-point plan emerged from realization by SACU Member States of a need to move SACU beyond an arrangement held together only by the common external tariffs and the revenue sharing arrangement to an integration project that promotes real economy development in the region.

Minister Davies noted that progress on the implementation of pillars of the five- point plan is uneven. SACU has registered good progress on trade facilitation and there is greater unity of purpose in negotiations with third parties (Economic Partnership Agreement (EPA), SACU-India and Tripartite Free Trade Area).

However, there is limited progress on the review of the revenue sharing arrangement and hence lack of adequate financial support for the implementation of cross-border industrial and infrastructure development projects. The SACU revenue pool is raised by South Africa from customs and excise duties. Mr Davies told MPs that in 2013-14 the total disbursement from the revenue pool would be about R70bn of which the BLNS countries would receive about R48bn. There is also lack of progress on the development of SACU institutions as a result of divergences in policy perspectives and priorities of Member States.

Enabling provisions provide for the establishment of National Bodies and a SACU Tariff Board. The SACU Tariff Board will make recommendations to Council on tariffs and trade remedies. Davies added that, until these institutions are established, functions are delegated to the International Trade Administration Commission (ITAC) in SA.

The minister warned that the lack of agreed policies would hinder effective decision-making on regional integration and industrialisation, which had made little progress since the 2011 summit convened by President Jacob Zuma. South Africa believes SACU needs to move “firmly towards a deeper development and integration”.

Minister Davies said SACU risked becoming “increasingly irrelevant” as an institution if it did not develop beyond operating a common external tariff, and a “highly redistributive” revenue-sharing arrangement. The lack of progress in developing new SACU institutions was primarily due to policy and priority differences among members. “Against this background South Africa needs to reassess how best to advance development and integration in SACU.”

Among the disagreements on tariff setting between South Africa and its neighbours highlighted by Mr Davies, was that South Africa saw tariffs as a tool of industrial policy while they regarded them as a means of raising revenue. For example, the other Sacu members wanted to include the revenue “lost” on import tariff rebates offered by South Africa into the revenue pool.

The pool provides these countries with a major source of their national budget. Rebates were seen as revenue foregone for which additional compensation should be sought. South Africa, on the other hand, argues that the rebates (for example on automotive imports) are part of its total tariff package and serve to attract investment and boost imports and therefore, contribute to expanding the revenue pool, not diminishing it.

He emphasised the development of a common approach on trade and industrial policy as the prerequisite for establishing effective SACU institutions in future.

He highlighted that a discussion on appropriate decision-making procedures on sensitive trade and industry matters that takes into account SACU-wide impacts is required. Source: The Department of Trade & Industry, and BD Live.

sez-figure-1The Minister of Trade and Industry, Dr Rob Davies says ten potential Special Economic Zones (SEZs) have been agreed upon with provinces. He told the Portfolio Committee on Trade and Industry in Parliament on Friday, that these potential SEZs must still go through a feasibility study to determine their viability. The Department of Trade and Industry was presenting the Special Economic Zones (SEZs) Bill to the Portfolio Committee.

The main objectives of the SEZ Bill, amongst others, are to provide for the designation, development, promotion, operation and management of Special Economic Zones; and to provide for the establishment of the Special Economic Zones Board. The SEZs are designed to promote socio-economic benefits and creation of decent work.

The purposes of the SEZs include facilitating creation of an industrial complex with strategic economic advantage for targeted investment and industries in manufacturing sector and tradable services. This will also focus on developing infrastructure to support development of targeted industrial activities and attracting foreign and domestic direct investment.

There are different categories of the SEZs that South Africa will make use of, namely:

  • A free port;
  • A free trade zone;
  • An industrial development zone; and
  • A sector development zone.

Hopefully Trade and Industry will clarify for both public and investors the differentiation between the four options. From a Customs and Tax perspective there could be divergent legal requirements, formalities and processes. The sooner that this can be finalised all the better for the various ‘zones’ to commence with their vigorous marketing campaigns.

Davies told the Committee that the Industrial Development Zones (IDZs) will continue to be one of the elements of the Special Economic Zones (SEZs). The IDZ programme was initiated in 2000 and four zones were designated, with three currently operational: Coega (Port Elizabeth), East London and Richards Bay. The IDZs including the current ones are types of the SEZs and once the new the Act is passed they will form part of the Special Economic Zone programme, according to the minister.

The existing industrial development zones (IDZs) were beginning to gain traction because of the way they were managed and promoted. He cited the example of the East London IDZ, which had a private sector investment of R600 million in 2009 compared to R4bn in 2012/2013.

Work under the current IDZ regulations include the Saldanha Bay which is about to be designated. The Saldanha Bay Feasibility Study published in October 2011, found that there was sufficient non-environmentally sensitive land upon which an IDZ development could take place. Total direct and indirect jobs are expected to amount to 4 492 in the first year, 8 094 in the second year, 7 274 in the third year, 10 132 in the fourth year and 14 922 in the fifth year. From the seventh year around 14 700 direct and indirect jobs would be sustained in the province as a result of the IDZ. Saldanha Bay is an ideal location for the development of an Oil & Gas and Marine Repair Cluster. The Port of Saldanha Bay is also competitively located between the oil and gas developments on the West Coast of Africa, as well as the recent gas finds on the East Coast of Africa.

The SEZ bill would provide a legal framework for the zones and for granting special incentives for businesses operating there such as duty free inputs. He said major areas of agreement had been reached between business‚ labour and community representatives in the National Economic Development and Labour Council. Labour wanted to have three Nedlac representatives on the 15 member SEZ boards and the department had agreed to this on condition they met the criteria in terms of qualifications and knowledge. Nine representatives would be from government and there would be three independent experts.

Business argued against municipalities having the right under the bill to propose SEZs as it said this was not their core business and they lacked the capacity for this. The department however decided to retain this clause‚ October said‚ because there were municipalities which did have this capacity and in any event the applications for SEZs would undergo rigorous evaluation.

The department also decided to go ahead with the idea of these SEZs being operated on a triple PPP basis (public private partnerships) even though labour disapproved of this on the grounds that it would be a form of private ownership. Sources: Engineering News & businessnews.howzit.msn.com

Minister Pravin Gordhan and his 'budget team' on their way to parliment [Picture credit-SARS]

Minister Pravin Gordhan and his ‘budget team’ on their way to parliament [Picture credit – SARS]

After more than a decade of fruitless marketing and billions spent on capital investment, Budget 2013 brings some hope of a turn-around and better fortunes for economic development zones in South Africa.

Minister of Finance, Pravin Gordhan announced, what is an unprecedented move. to bolster support for government’s Special Economic Zone (SEZ)programme. Investors in such zones are expected to qualify for a 15% corporate tax rate, and in addition, a further tax deduction for companies employing workers earning less than R60,000 per year.

This is a significant development in that the previous dispensation under the Industrial Development Zone (IDZ) programme only afforded prospective investors a duty rebate and VAT exemption on imported goods for use in the Customs Controlled Area (CCA) of an IDZ. The reality is that these benefits were simply not enough to woo foreign company’s to set up shop in our back yard, let alone existing big business in South Africa to relocate to these zones. Mozambique, next door, has had much success as are other African countries through the offering of company tax holidays with the introduction of export-focussed special manufacturing facilities.

The SEZ (so it would seem) differs little from the IDZ approach save the fact that the former does not require the location of the economic zone at an international airport, seaport or border crossing. As such, an existing IDZ may ‘house’ a special economic zone, thus maximizing return on investment.

Recent developments in SA Customs realise a provision permitting foreign entities to register as importers or exporters under the ‘foreign principal’ clause in the Customs and Excise Act. Approval of such is dependant on the foreign principal establishing a business relationship with a South African ‘Agent’. This ‘agent’ is required to be registered with the SA Revenue Service as the party representing a ‘foreign principal’ in customs affairs. At this point, the provision is being applied to business entities in BLNS countries who import or move bonded goods into or from South Africa.

Future global application of this provision could boost the possibilities of a broader range of investor to favourably consider SEZ opportunities in South Africa. This option will, no doubt, not go unnoticed by the big audit firms seeking to broker ‘cross-border’ customs facilities for their multi-national clients. I perceive that more introspection is still required concerning ‘non-resident’ banking facilities and transfer pricing issues to enable the global application of the foreign principal concept. But after all this seems a good case for trade liberalisation. Add to this the forthcoming launch of Customs new integrated declaration processing system that will (in time) offer simplified electronic clearance and expedited release facilities for future SEZ clients.

Iron ore (Engineering News)

Iron ore (Engineering News)

The South African cabinet has endorsed the final report on the work of the Intra-Departmental Task Team (IDTT) on iron ore and steel, says Minister in the Presidency responsible for Performance Monitoring, Evaluation and Administration, Collins Chabane.

Briefing reporters following Cabinet’s last meeting of year on Thursday, Chabane said in keeping with prior decisions to enhance the competitiveness of the steel value chain, Cabinet endorsed the final report on the work of the IDTT and the recommendations contained in the report for urgent implementation.

He said there had been a lot of debate and interaction between the Departments of Trade and Industry, Economic Development and steel producers and mining houses with regards to the pricing of steel.

In August 2010, the dti announced the formation of a task team to make recommendations into the viability of local steel production. This as it had expressed concern about the high price of steel in the South African economy.

“Within the context of the beneficiation programme where the government is emphasising and wanting to expand the beneficiation of South African mineral products as it is one of the critical aspects,” said Chabane.

Among the recommendations of the task team are the amendments to the Competition Act and the introduction of export taxes on iron ore and steel where appropriate. The recommendations also include the promotion of new steel investments and prioritisation of electricity available and connections to such investments.

“Government would want, among other things, to expand the number of participants in terms of those who are producing steel as part of the reason to introduce new competition. Secondly [we] also want to take measures which are going to contain the expansion of prices of steel countrywide in order to stimulate the domestic production of various products which need to be processed in the country.

“The government is going to take several steps with regards to that in order to lower the price for domestic consumption and to redirect the steel products to provide for the South African economy,” explained Chabane.

He further added that the Industrial Development Corporation (IDC) will have to play a greater role in the industrialisation of the country through being involved in manufacturing as well as beneficiation. Source: SAnews.gov.za

I post this article given it ties together many of the initiatives which I have described in previous articles. The appears to be an urgency to implement these initiatives, but the real question concerns the sub-continent’s ability to entrench the principles and maintain continuity. At regional fora its too easy for foreign ministers, trade practitioners and the various global and financial lobbies to wax lyrical on these subjects. True there is an enormous amount of interest and ‘money’ waiting to be ploughed into such programs, yet sovereign states battle with dwindling skills levels and expertise. Its going to take a lot more than talk and money to bring this about.

South Africa is championing an ambitious integration and development agenda in Southern Africa in an attempt to advance what Trade and Industry Minister Rob Davies describes as trade and customs cooperation within the Southern African Customs Union (SACU), the Southern African Development Community (SADC) and other regional trade organisations.

Central to pursuing this intra-regional trade aspiration are a series of mechanisms to combine market integration and liberalisation efforts with physical cross-border infrastructure and spatial-development initiatives. Also envisaged is greater policy coordination to advance regional industrial value chains. “Trade facilitation can be broadly construed as interventions that include the provision of hard and soft infrastructure to facilitate the movement of goods, services and people across borders, with SACU remaining the anchor for wider integration in the region,” Davies explains.

This approach is also receiving support from the US Agency for International Development (USAid), which recently hosted the Southern African Trade Facilitation Conference, held in Johannesburg.

Trade programme manager Rick Gurley says that virtually every study on trade in sub- Saharan Africa identifies time and cost factors of exporting and importing as the most significant constraints to regional trade potential. Limited progress has been made by SADC member States and SACU partners to tackle the factors undermining trade-based growth, limiting product diversification and increasing the price of consumer goods, including of foodstuffs. However, far more would need to be done to realise the full potential of intra-regional trade.

Regional Alliance
One high-profile effort currently under way is the Tripartite Free Trade Area (T-FTA), which seeks to facilitate greater trade and investment harmonisation across the three existing regional economic communities of the SADC, the Common Market of Eastern and Southern Africa and the East African Community.

The existing SADC FTA should be fully implemented by the end of the year, with almost all tariff lines traded duty-free and, if established, the T-FTA will intergrate the markets of 26 countries with a combined population of nearly 600-million people and a collective gross domestic product (GDP) of $1-trillion. At that size and scale, the market would be more attractive to investors and could launch the continent on a development trajectory, Davies avers. It could also form the basis for a later Africa-wide FTA and a market of some $2.6-trillion.

However, as things stand today, intra- regional trade remains constrained not merely by trade restrictions but by a lack of cross-border infrastructure, as well as poor coordination and information sharing among border management agencies such as immigration, customs, police and agriculture.Cross-national connectivity between the customs management systems is also rare, often requiring the identical re-entry of customs declarations data at both sides of the border, causing costly and frustrating delays.

USAid’s regional economic growth project, the Southern African Trade Hub, is a strong proponent of the introduction of several modern trade-facilitation tools throughout the SADC – a number of which have already been successfully pioneered. These tools, endorsed by the World Customs Organisation (WCO) Framework of Standards, which offers international best-practice guidelines, are aimed at tackling the high costs of exporting and importing goods to, from, and within Southern Africa, which has become a feature of regional trade and discouraged international investment.

Bringing up the Rear
A country’s competitiveness and the effec- tiveness of its trade facilitation regime are measured by its ranking on World Bank indices and, with the exception of Mozambique, Southern African States perform poorly – with most in the region settling into the lowest global quartile of between 136 and 164, out of a total of 183. “Our transaction costs in Africa across its borders are unacceptably high and inhibit trade by our partners in the private sector,” says WCO capacity building director Erich Kieck. “We need our States to develop good ideas and policies, but the true test lies in their ability to implement them,” he notes.

He adds that not only does trade facilitation require efficient customs-to-customs connectivity, but also demands effective customs-to-business engagement, adding that, while customs units are responsible for international trade administration, they are not responsible for international trade. “The private sector is the driver of economic activity and international trade, and government’s responsibility is to understand the challenges faced by the business community and develop symbiotic solutions,” Kieck notes.

Despite the establishment of regional trade agreements and regional economic communities in Southern Africa, many partner- ships have failed to deliver on their full potential to increase domestic competitiveness.

In a report, African Development Bank (AfDB) senior planning economist Habiba Ben Barka observes that, despite the continent’s positive GDP growth record – averaging 5.4% a year between 2005 and 2010 – it has failed to improve its trading position or integration into world markets. In 2009, Africa’s contribution to global trade stood at just under 3%, compared with nearly 6% for Latin America and a significant 28% for Asia.

“Since 2000, a new pattern of trade for the continent has begun to take centre stage, as Africa has witnessed an upsurge in its trade with the emerging Brazil, Russia, India and China economies. Overall, Africa is trading more today than in the past, but that trade is more with the outside world than internally,” says Ben Barka. She adds that while many African regional economic communities have made some progress in the area of trade facilitation, much greater effort is required to harmonise and integrate sub-regional markets.

To address enduring trade barriers, consensus among business, government and trade regulators appears to lean towards the adoption of one or a combination of five facilitation tools. These include the National Single Window (NSW), the One-Stop Border Post (OSBP), cloud-based Customs Connectivity, Coordinated Border Management (CBM) and Customs Modernisation Tools.

A National Single Window
NSWs connect trade-related stakeholders within a country through a single electronic-data information-exchange platform, related to cross-border trade, where parties involved in trade and transport lodge standardised trade-related information or documents to be submitted once at a single entry point to fulfil all import, export and transit-related regulatory requirements.Mauritius was the first SADC country to implement the NSW and consequently improved its ranking on the ‘Trading Across Borders Index’ to 21 – the highest in Africa. It was closely followed by Ghana and Mozambique, which have also reported strong improvements.

Developed in Singapore, the benefits of government adoption include the reduction of delays, the accelerated clearance and release of goods, predictable application, improved application of resources and improved transparency, with several countries reporting marked improvement in trade facilitation indicators following the NSW implementation.

In South Africa, the work on trade facili-tation is led by the South African Revenue Service (SARS), which focuses on building information technology (IT) connectivity among the SACU member States, and strengthen- ing risk-management and enforcement measures. However, SARS’ approach to the NSW concept remains cautious, Davies explains. “SARS has considered the viability of this option as a possible technological support for measures to facilitate regional trade, but considers that this would fall outside the scope of its current approach and priorities in the region,” he said.

One-Stop Border Posts
As reported by Engineering News in December last year, effective OSBPs integrate the data, processes and workflows of all relevant border agencies of one country with those of another, which culminates in a standardised operating model that is predictable, trans- parent and convenient. An OSBD success story in Southern Africa is the Chirundu border post, where a collaboration between the Zambia and Zimbabwe governments has culminated in a single structure, allowing officers from both States to operate at the same location, while conducting exit and entry procedures for both countries.

Launched in 2009, this OSBP model is a hybrid of total separation, joint border operations and shared facilities in a common control zone. Implementation of the model has reduced clearance times to less than 24 hours, significantly reduced fraudulent and illegal cross-border activity, enabled increased information sharing between border agencies and reduced the overall cost of export and import activities in the area.

Earlier this year, former South African Transport Minister Sibusisu Ndebele indicated that Cabinet was looking into establishing a mechanism that would bring all border entities under a single command and control structure to address the fragmentation in the country’s border operations, particularly at the high-traffic Beitbridge post between South Africa and Zimbabwe. “The ultimate vision is to create one-stop border operations to facilitate legitimate trade and travel across the borders,” he said.

Customs Connectivity and Data Exchange
Improved connectivity between customs limbs in sub-Saharan Africa has perhaps made the most indelible strides in the region, with improved IT connectivity between States identified as a priority by Sacu.

This includes customs-to-customs inter- connectivity, customs-to-business inter- connectivity and interconnectivity between customs and other government agencies. SACU members have agreed to pursue the automation and interconnectivity of their customs IT systems to enable the timely electronic exchange of data between administrations in respect of cross-border movement of goods. “As a consequence of this acquiescence, we have identified two existing bilateral connectivity programmes as pilot projects to assess SACU’s preferred connectivity approach, cloud computing between Botswana and Namibia and IT connectivity between South Africa and Swaziland,” says SACU deputy director for trade facilitation Yusuf Daya. He adds that a regional workshop was recently convened to explore business processes, functions, data clusters and the application of infrastructure at national level to improve and develop intra-regional links.

Coordinated Border Management
The SADC has been a strong proponent of CBM efforts in the region, which promotes coordination and cooperation among relevant authorities and agencies involved in, specifically, the protection of interests of the State at borders. “The union has drafted CBM guidelines for its members on implementation, based on international best practice, and has received indications of interest from several member States,” explains SADC Customs Unit senior programme officer Willie Shumba.He adds that CBM is a key objective of regional integration, enabling the transition from an FTA to a customs union and, eventually, to a common market, through effective controls of the internal borders.

Customs Modernisation
South Africa’s customs modernisation initiative is well advanced and came about following Sars’ accession to the WCO’s revised Kyoto Convention in 2004, which required customs agencies to make significant changes to it business and processing models. These changes included the introduction of simplified procedures, which would have fundamental effects on and benefits for trade and would require a modern IT solution.

Since its inception, the SARS Customs Modernisation Programme has gained tremendous momentum, with amendments to the Passenger Processing System and the replacement of SARS’s Manifest Acquittal System in the Automated Cargo Management system. Further adjustments were made to enable greater ease of movement of goods, faster turnaround times and cost savings, as well as increased efficiency for SARS. This phase included the introduction of an electronic case-management system, electronic submission of supporting documents, the centralisation of back-end processing in four hubs and an electronic release system and measures to enhance the flow of trucks through borders – in particular at the Lebombo and Beitbridge borders.

Proper Planning
AfDB’s Ben Barka warns that, prior to the implementation of any border improvement efforts by countries in Southern Africa, a thorough analysis and mapping of each agency’s existing procedures, mandate and operations should be undertaken.“Based on these findings, a new set of joint operational procedures need to be agreed upon by all involved agencies and must comply with the highest international standards,” she says.

Development coordination between States is essential, as the largest disparity among regional groupings, in terms of intra-regional trade, is clearly attributable to their differentiated levels of progress in various areas, including the removal of tariffs and non-tariff barriers, the freedom of movement of persons across borders and the development of efficient infrastructure. Source: Engineering News.

A bold paradigm shift in South Africa’s economic policy is required to ensure the success of the country’s new special economic zones (SEZs) programme, according to Centre for Development and Enterprise (CDE) executive director Ann Bernstein.At the launch of the new CDE report on SEZs, she explained that South Africa’s current economy favoured skill and capital-intensive industry, which was not making the cut in terms of job creation.

“South Africa needs to create the right kind of environment for the emergence of businesses that can employ large numbers of unskilled people. That is what we should use the SEZs to do.“This will require bold leadership and engagement with the difficult choices on labour costs and flexibility that must be made. The alternative is to waste resources and energy yet again on a policy that fails,” Bernstein urged.

The report, titled ‘Special Economic Zones: Lessons for South Africa from international evidence and local experience’ suggested that South Africa should establish at least two large SEZs that were focused on low-skill, labour-intensive industries such as the clothing and textile sectors and enable them to compete globally. “Without reform, the only way South African companies can compete with Chinese, Vietnamese and Indian companies is by mechanisation, which results in fewer people being employed, and a greater reliance on skills,” Bernstein pointed out. “International evidence shows that the most successful SEZs were public–private partnerships,” Bernstein noted. Further, the report showed, as recognised by government, that South Africa’s industrial development zones (IDZs) that include Coega, East London and Richards Bay, had largely failed to boost economic growth, create jobs, promote industrialisation or accelerate exports.

Bernstein attributed this to the lack of a clear definition for what these zones should entail, as well as a strategy for attracting investors. “The IDZs are basically just industrial parks – it’s no wonder they have not been successful in attracting new investors and creating jobs.” Although the Department of Trade and Industry (DTI) had spent R5.3-billion on developing these zones, the vast majority of the 33 000 jobs created were short-term construction jobs, with only 5 000 permanent jobs created.

Bernstein said countries such as China, Costa Rica, Mauritius and Latin America countries could be viewed as benchmarks for South Africa in terms of IDZs. Rising costs in Asia, especially China, where labour-intensive firms were looking for new regional locations, were creating opportunities for IDZs in South Africa. The CDE argued that South Africa should seize the opportunity to compete for a sizable portion of the jobs that could sprout from this.

“A bold new SEZ strategy could become a platform for new companies and new investors that use unskilled labour rather than machines,” Bernstein indicated. “South Africa’s new SEZ programme needs to be a presidential priority. The DTI needs to be fully supported by all other departments of government. Unless the whole of government gets behind the effort, we’re not going to see the kind of investor uptake that would actually make a difference,” CDE research and programme director Antony Altbeker said. Trade and Industry Minister Rob Davies is set to table the draft SEZ Bill in Parliament later this year, while Finance Minister Pravin Gordhan announced that R2.3-billion would be allocated to the establishment of SEZs were in the 2012/13 Budget.

However, the CDE’s report warned that the Bill provided no clarity about what would differentiate SEZs from industrial parks, its envisaged governance arrangements for SEZs was confusing and said the role of the private sector was unclear. Source: Engineering News

A state-owned enterprise, the Mafikeng Industrial Development Zone (MIDZ), once mooted as an industrialisation solution and economic booster for the province, has been dissolved. The failure of the industrial development zone was confirmed at the weekend following a review by the provincial government of state-owned enterprises in the North West. Established in 2000, the development zone was said to have the potential to industrialise the North West, starting in Mafikeng with a staggering R7bn turnover, once the entity was operational.

However, it got off to a rocky start and has for the past several years been dormant despite having millions of rands pumped into its coffers. But it turned into a white elephant.Provincial government spokesperson Lesiba Kgwele said: “The decisive resolve to wind down the development zone was taken because the organisation was technically insolvent as its liabilities had exceeded its assets.”

He pointed out that an administrator had been appointed and former MIDZ CEO Tebogo Kebotlhale’s contract had recently been terminated. After the appointment of a caretaker administrator on January 18, the contract of its former CEO, who had been on suspension from April 2011, was terminated on February 29. The provincial government had noted that besides the completion of the first phase of the development amounting to R126m, the entity has not achieved any of its strategic intents.The entity was intended to design, build, operate and manage a world-class industrial development zone from the Mafikeng Airport. It was supposed to establish viable investment opportunities and recruit potential public and private investors, but the entity failed.

As part of the winding down process, assets belonging to the zone, irregular payments, verification of past salary adjustments and overpayments to staff are to be recovered. For instance, a bio-diesel project started on the outskirts of Mafikeng was a huge flop as the jatropha plants never left the nursery and the site currently resembles a wasteland.

Democratic Alliance provincial leader Chris Hattingh said the MIDZ was a waste from its inception. “The entity should never have been started and should have been closed at least six years ago. It received millions for nothing and has only succeeded in downgrading a Grade 7 airport to Grade 1 standards, making it equal to a farm airstrip,” he said. Source: The New Age

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Trade remedies are by their very nature complex and most often ill-thought-out. This is said not so much from an entity whom gains to benefit from such an incentive scheme but more from an administrative and compliance perspective. These schemes require more than your average customs and trade consultant; someone who in fact not only knows  customs and trade law very well, but the motor industry as well. Similarly, on the side of the administrating authority an equally adept and experienced team is required to audit this process. I would like to believe that every attempt has been made to ensure that clear legal and procedural guidelines are in the offing, compared to the current MIDP process. On the other side of the coin, exactly how will the local community benefit from the ‘auto cartel’s’ new fortune? Based on SARS recent publication of its Compliance Programme it is noted that the tobacco and textile industries are singled out for scrutiny. Has the motor industry been purposely overlooked?

The SA motor industry stands to benefit from the introduction of a new programme next year, which will affect firm-level strategies, according to Standard Bank research analyst, Shireen Darmalingam. The Automotive Production Development Programme (APDP) aims to raise volumes to 1.2 million vehicles produced per annum by 2020, and to diversify and deepen the components supply chain. The new programme replaces the Motor Industry Development Programme (MIDP), which has been in existence since 1995. The soon-to-be phased out programme centred, among other things, on encouraging motor vehicle and component exports by allowing duty-free imports or reduced import tariffs, depending on the level of local content of exports.

Darmalingam said the replacement of the MIDP should not be viewed as a failure but rather as a point from which to move on and encourage further development of the SA motor industry. She said the APDP would offer the local automotive industry a sense of certainty through to 2020, which should encourage further growth.

“Whether the APDP will benefit certain industries more than others is still a contested question. Indeed, it appears that some benefits may be in favour of larger firms. Nonetheless, all firms are in line to benefit from the new APDP programme.” She said there was a concern that multinational companies were choosing to source leather products from suppliers closer to the major markets. She added that there was a further concern that the APDP, which aimed to provide a production incentive rather than an export incentive, might impact negatively on export-orientated component companies such as those in the leather sector.
However, she said sectors that supplied the aftermarket should benefit from the shift in policy, from MIDP to APDP, due to be implemented from January next year. Source: Business Live


ZIMBABWE’S export trade promotion body, ZimTrade, has warned against over-reliance on South African imports, stressing that Harare could plunge into a serious economic crisis should its southern neighbour experience unexpected production and supply challenges. South African producers of basic commodities, automobile services, chemicals, agricultural inputs and farm produce have taken advantage of a significant weakness in Zimbabwean firms’ capacity to service the domestic market, which has triggered widespread shortages of locally manufactured goods.

South Africa and Zimbabwe have intensified trade relations, but the balance of trade has always been in favour of South Africa, Africa’s largest economy. In March, South Africa’s Deputy Minister of the Trade and Industry, Elizabeth Thabethe, flew into Zimbabwe with a delegation of 45 businesspeople to intensify the hunt for new markets for her country’s companies north of the Limpopo. The business delegation comprised companies in the infrastructure (rail, telecommunication and energy), manufacturing, agriculture and agro-processing, mining and mining capital equipment, as well as information and communication technology.

Zimbabwe labour unions are reportedly facing tremendous pressure from workers to campaign against an overflow of South African products into Zimbabwe to allow for the resuscitation of local industries to create jobs, have said Harare had “turned into a supermarket” for South African products. (Huh? strange since so many of the eligible working Zimbabweans have gainful employment in South Africa. Sounds more like labour union politicking)

If South Africa, for example, is to experience a supply hitch, this will be transmitted directly into Zimbabwe’s production and consumption patterns. The appreciation of the rand in the second quarter of 2011, for instance, resulted in price increases on the domestic market.In other words, heavy dependency on imports will leave an economy susceptible to world economic shocks, according to ZimTrade.

Statistics provided by the Department of Trade and Industry (dti) of South Africa in March, indicated that exports to Zimbabwe increased to R15,5 billion in 2011, from R15,1 billion in 2010, while Zimbabwe’s exports to that country increased to R2,9 billion in 2011, from R1,3 billion in 2010. The statistics indicate that South Africa imported US$1 billion worth of goods and services from the Southern African Development Community trade bloc, with 37 percent of the imports coming from Zimbabwe. The dti said imports from South Africa represented 45 percent of Zimbabwe’s total imports. Therefore, according to ZimTrade, “A growing trade deficit could increase the country’s risk of imported inflation and a direct transmission of shocks into the economy.

South Africa has also been Zimbabwe’s major source market for industrial inputs. The United States, Kuwait, China, Botswana and Zambia were Zimbabwe’s other major trading partners in 2011.However, the dti statistics indicated that Harare had narrowed its trade deficit with Africa’s largest economy in 2011 to R12,6 billion, from R13,7 billion in 2010. This translates to about US$12 million and US$13 million respectively

The dti deputy minister, Thabethe acknowledges that “South Africa and Zimbabwe are not only geographical neighbours. The two countries share historical and cultural linkages. Furthermore, South Africa’s economy is inextricably linked to Zimbabwe’s economy due to its geographical proximity to Zimbabwe whose political and economic welfare has a direct impact on South Africa”. Source: The Herald (Zimbabwe)

While there have been several attempts in recent years by various private sector entities to bring about innovation to the South African market, these opportunities are now being lost to other quarters on the African continent, such as Nigeria, Kenya, and closer to home, Angola. Perhaps its time for government authorities to realise that South Africa is in serious danger of losing its competitive edge.

It will do all economic and fiscal policy makers, government administrators and trade practitioners good to view the video below. It portrays the success of Foreign Trade Zone 202, in the Port of L.A. is the largest FTZ in the United States. Learn why and how Sony, Citizen Watch Company, Puma and many others take advantage of FTZ 202 to optimize their inventories and control costs. Then consider whether the local SEZ policy and bill aspires to any of this…

Despite having burned its fingers with Industrial Development Zones (IDZs), which involved a few fiscal benefits (shrouded in legalese) and billions in infrastructure, Trade and Industry has gone into overdrive to push its new policy on special economic zones (SEZs). It has relaxed ‘locality’ for one, i.e. such zones need not be located in close proximity to an international port or airport. Moreover, SEZs are now being promoted to ‘compliment’ existing IDZs and not replace them as was erroneously suggested in an earlier post.

While the South African Department of Trade and Industry (the dti) is conducting public hearings on the matter, it is perhaps relevant to consider what the Free Market Foundation (FMF) – a think-tank on limited government and economic freedom – has to say on the matter. The content of the report might well attract support from some in the business community involved with manufacturing, distribution and logistics. Read the FMF’s evaluation of the dti’s SEZ Policy here!

While there are not many trade remedies available to local business many prospective requests have over the last decade been presented to establish so-called distribution centres/hubs and ‘virtual bonded warehouses’, which have not borne much fruit mainly due to the lack of a legal framework for their operation. Moreover, in government there is always a cautious resistance to liberalisation in customs and trade laws (they directly impact the fiscus) in the absence of viable risk mitigation strategies or remedies. Perhaps it has something to do with the dwindling public sector skills and experience levels available to conduct effective audits; although, the big audit firms would readily contest this and advocate the outsourcing of such function to the private sector. As the development of more sophisticated systems in SARS come on stream, ICT will no longer be an obstacle. Through increased automation comes the availability of additional human resources who can be up-skilled to perform audit work. Both Tax and Customs Modernisation programmes bare testimony to this.

The establishment of the IDZ programme (circa 2000) was fraught with inter-departmental tensions around the so-called benefits and concessions to be made available to foreign investors. The lack of a clear framework did not allow for much ‘liberalisation’ of controls and fiscal benefits. In fact the customs dispensation offered procedures and facilities to IDZs identical to that available in the national customs territory. Tax holidays and relaxed red tape are characteristic of some of the more successful SEZs around the world, as the article will attest. The dti’s latest SEZ Bill and Policy do not hint to any great length how things will be different this time round. There is however some firm calls within government to consider relaxed labour regulations – the test however lies in whether the policy makers have the appetite (or vision) to permit liberalisation in this area. I have a simple view on this matter – (i) create a favourable economic environment focusing development on SMMEs and entrepreneurship, and (ii) get the standard customs procedures and controls right through modernisation and there will be no need for ‘tax holidays’ and economic zones in this country!