The South African Electrotechnical Export Council (SAEEC) recently hosted a workshop at its Midrand offices aimed at addressing the reduction of import duties imposed on electronic components. The project was initiated by the SAEEC and South African Electronics Industry Federation (SAEIF) on behalf of their members, and enjoys the backing of the dti. Also involved were representatives of ADEC – the Association of Distributors and Manufacturers of Electronic Components.
According to Eileen Leopold, chief executive officer of the SAEEC, this initiative has its origins in a study commissioned by the SAEEC 18 months ago to see how export growth could be accelerated and competitiveness improved in the electronics manufacturing sector.
While many electronic components – integrated circuits, passives and others – do not attract import duties at present, there are several product groupings which are hit with duties of up to 15%. Naturally, the South African companies that import and distribute these components are obliged to pay these duties and have no choice but to pass the extra cost on to their customers, which in turn drives up the cost of manufacturing electronic products locally.
This goes against the dti’s mandate to promote the manufacture and export of South African technology, but creates something of a catch-22 situation, since government is also committed to protecting local companies who can and do manufacture certain components locally (transformers and circuit breakers amongst others).
One objective which emerged from the workshop, therefore, is for those involved in the project to more clearly differentiate between exactly which components are and which are not manufactured locally, and to eliminate or reduce the duties on those which are not. This will require liaising between industry and the International Trade Administration Commission (ITAC) which handles administration of import duties on behalf of SARS.
To provide insight into the application process required to achieve this, two ITAC representatives were in attendance at the workshop, as was Danie Jordaan, a consultant intimately familiar with these matters. Based on their input, the process is likely to prove rather tedious and will require several months to complete. Despite the potential headaches, the key players are committed to seeing the process through and Jordaan will likely be contracted to handle the application(s) on their behalf.
While component tariff reductions offer a glimmer of hope to the industry, the electronics manufacturers present at the session believe that more must be done. Firstly, they expressed concern that, even if duties on certain components were reduced, resellers would inflate their profit margin on these components and leave the manufacturers no better off.
Secondly, and perhaps more significantly, local manufacturers want duties to be levied on imported finished products, printed circuit boards and subassemblies that can be manufactured locally. This type of approach has already seen success in the case of televisions, resulting in millions of Rands of new business for South African electronics contract manufacturers, and could bear fruit almost immediately if applied to other products such as in the electricity metering and security sectors (and many others, of course).
Moving on from this workshop, solid timeframes and procedures have been established in an effort to unite the electronics industry in backing this two-pronged approach to make the manufacturing sector more competitive not only locally, but globally.
In closing, Leopold stated that “it was most encouraging to see so many players coming together to see how we can improve the competitiveness and growth of this sector. In an ideal world there will be a grand plan but so many sectors are competing for government’s intervention that the companies will have to take the bull by the horns.”
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