Annual Report (2012/2013) Presentation to the Portfolio Committee on Economic Development

1. Annual Report (2012/2013) Presentation to the Portfolio Committee on Economic Development 05 November 2013 Siyabulela Tsengiwe Chief Commissioner

2. Introduction. Key Strategic Objectives & Performance Areas & Services. Tariff Investigations. Anti-Dumping Investigations. Import and Export Control. Corporate Governance. Auditor General’s Report. Financial Position & Performance. Contents

3. 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. Introduction

4. 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. Introduction

5. Key Strategic Objectives, Performance Areas & Services • Technical Inputs on Trade and Industrial Policy , including Sector Strategies • Ensure contribution to employment creating growth and development through effective delivery of international trade instruments • Ensure strategic alignment and continued relevance with the Department of Economic Development and national agenda • Ensure organisational efficiency and effectiveness of ITAC • International Trade Instruments • International Trade Technical Advice • Business Support Services • Customs Tariff Investigations • [Increasing Duties, Reducing Duties, & Creation of Rebates] • Human Resources • Finance • Information Technology • Legal Services • Policy and Research • 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. • 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. • Technical Inputs on Trade Negotiations • [WTO, SADC & SACU] ; • Bilateral Agreements • [EU, EFTA, MERCOSUR, & INDIA] • Trade Remedies Investigations • [Antidumping, Countervailing & Safequards] • Import & Export Control • [Permits & Enforcement] • The performance of the institution will be driven through appropriate business solutions, efficient and effective utilisation of material, human and information technology resources.

6. Tariff Investigations Completed During 2012\2013

7. Tariff Investigations Completed During 2012\2013

8. Tariff Investigations Continued

9. Tariff Investigations Continued

10. Administration of MIDP & APDP MOTOR INDUSTRY DEVELOPMENT PROGRAM (MIDP) AUTOMOTIVE PRODUCTION AND DEVELOPMENT PROGRAM (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) – 2010 • Heavy Commercial Vehicle (HCVs) - 63 • Eligible Export Certificate (EECs) - 68 • Productive Asset Allowance Certificate(PAAs) – 50 • Certificates issued under the APDP: • Eligible Production Certificates (EPCs) – 80

11. Anti-Dumping Investigations ORIGINAL INVESTIGATIONS REVIEWS EXCLUSION

12. Anti-dumping investigations ORIGINAL INVESTIGATIONS CARRIED FROM PREVIOUS YEAR SUNSET REVIEW INVESTIGATIONS CARRIED FROM PREVIOUS YEAR

13. Import and Export Control IMPORT PERMITS ISSUED • 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 Resources • Mineral fuels and oils • Chemicals • Rubber and tyres • Metals • Mechanical Appliances • Automotives EXPORTPERMITSISSUED • Export permits issued in 2012/2013 amounted to 6 962. The target was 7 000.

14. 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. Corporate Governance COMPLIANCE & INTERNAL CONTROLS

15. Corporate Governance Continued RISK MANAGEMENT AUDIT COMMITTEE REPORT • 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. • 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.

16. Auditor General Report IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE • 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.

17. Auditor General Report Continued 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 • 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.

18. 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

19. Financial Position Continued

20. 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

21. Financial Performance Continued

22. Thank YouOffice Contact Details: 012 394 3713Cell: 082 454 8979 stsengiwe@itac.org.zawww.itac.org.za