Export Tax in the South African Context

made_in_south_africa___barcode_and_flag_by_netsrotj-d5cmbq9Export taxes are increasingly becoming a focus of attention in South African trade policy, and the objective of this paper is to review the trade and economic issues associated with these taxes. While they are similar to import tariffs in their effects, export taxes remain very much the ‘poor cousins’ of import tariffs in trade policy circles. While attention is paid to them in many bilateral and regional agreements, the multilateral World Trade Organisation (WTO) has little to say about them other than an awakening to their importance when it comes to negotiating a new member’s accession to the world body.

South Africa currently levies an export tax on unpolished diamonds in an attempt to develop local skills and promote the domestic industry, and it is considering a recent department of trade and industry report that recommends that consideration be given to an export tax on iron ore and steel. South Africa has some of the prerequisite market power in the global iron ore trade but not enough to ensure an outcome entirely beneficial to its export trade. The salutary example of South Africa’s competitor India is discussed, as India recently increased its export tax in this sector to 30% and has seen its global market shares plummet. The more interesting sector for South Africa is the ferrochrome and ferrochrome ore trade, as here South Africa does have significant market shares. South Africa has had about a 45% market share over the last three years in global exports, while China has imported around 70% to 85% of this global trade in recent years. Advocates argue that a tax on chromite ore exports will shift the relative economics back to empower South African producers of processed ferrochrome. This sets the stage for an interesting battle between South Africa and China, and one set against the background of South Africa’s recent admission to the BRICS club. If such an export tax is invoked, South Africa needs to be conscious that it at best provides a window of opportunity for the domestic sector to improve its technological efficiency and that it is not a long or even medium-term solution.

For an in-depth appraisal on export tax in South Africa, please read Ron Sandrey’s report “Export tax in the South African context

Source: Tralac & Author -Ron Sandrey

Export tax mooted on iron ore and steel

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