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Annual Report (2013/2014) Presentation to the Portfolio Committee on Economic Development

Annual Report (2013/2014) Presentation to the Portfolio Committee on Economic Development 28 October 2014 Siyabulela Tsengiwe Chief Commissioner. Introduction. Key Strategic Objectives, Performance Areas & Services.

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Annual Report (2013/2014) Presentation to the Portfolio Committee on Economic Development

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  1. Annual Report (2013/2014) Presentation to the Portfolio Committee on Economic Development 28 October 2014 Siyabulela Tsengiwe Chief Commissioner

  2. Introduction. Key Strategic Objectives, Performance Areas & Services. 3. Trend Analysis of import tariff increases and reductions from 2003 to 2013. Tariff Investigations. Anti-Dumping Investigations. Import and Export Control. Judicial Reviews. Corporate Governance. Auditor General’s Report. Financial Performance. Contents

  3. South Africa’s producers of industrial and agricultural goods will continue to experience cost pressures and global market distortions. ITAC support must be complemented by measures that seek to address competitiveness constraints and promote exports. Post the economic crisis, the year 2012/13 that preceded the year under review saw the highest number of tariff increases. A peak was reached in 2012/13 and we are now seeing a downward trend. Although the global economy is recovering it is not yet robust, which has a negative effect in weakening demand for our exports. This necessitates addressing domestic challenges a priority. The Commission follows a developmental approach to tariff setting for both industrial and agricultural goods. The Commission’s recommendations are evidenced based and conducted on a case-by-case basis. A pragmatic approach, focussing on the outcomes: domestic production, investment, job retention and creation as well as international competitiveness. Introduction

  4. 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.

  5. Trend Analysis of import tariff increases from 2003 to 2013. Chart 1: Number of increases recommended by the Commission

  6. Trend Analysis of import tariff reductions from 2003 to 2013. Chart 2: Number of reductions recommended by the Commission

  7. Tariff Investigations Completed During 2013\2014

  8. Tariff Investigations Completed During 2013\2014

  9. Tariff Investigations Continued

  10. Tariff Investigations Continued

  11. 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) – 94% of the 1 213 certificates within set timeframe. • Productive Asset Allowance Certificate(PAAs) – 36% of the 71 PAA certificates within set timeframe. • Certificates issued under the APDP: • Eligible Production Certificates (EPCs) – 68% of the 105 EPC certificates within set timeframe. • Production Rebate Credit Certificates (PRCCs) - 87% of the 776 certificates within the set timeframe.

  12. Trade Remedies ORIGINAL INVESTIGATIONS

  13. Trade Remedies REVIEWS

  14. Trade Remedies ORIGINAL INVESTIGATIONS CARRIED FROM PREVIOUS YEAR SUNSET REVIEW INVESTIGATIONS CARRIED FROM PREVIOUS YEAR SAFEGUARD INVESTIGATIONS CARRIED FROM PREVIOUS YEAR

  15. Import and Export Control IMPORT PERMITS ISSUED • During 2013/2014 import permits issued amounted to 17 332. The target was 13 500. • 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 2013/2014 amounted to 10 013. The target was 7 500.

  16. Controls on scrap metal PRICE PREFERENCE SYSTEM FOR SCRAP METAL EXPORTS (PPS) • The Minister of Economic Development issued a policy directive in terms of Section 5 of the International Trade Administration Act, directing ITAC to:- • regulate the exportation of ferrous and non-ferrous waste and scrap; • not allowing ferrous and non-ferrous waste and scrap to be exported unless first offered to the domestic consumers of scrap metal for a period determined by ITAC and at a price preference determined by ITAC. The policy intent being to promote scrap metal beneficiation and to reverse the decline in the metal fabricating consuming industries. To allow the domestic industry to have access to affordable quality scrap and to supply inputs into governments infrastructure programme. • ITAC published guidelines on 16 September 2013 in terms of which ferrous and non-ferrous waste and scrap must be offered to local consumers for a period of 15 working days and at a price preference calculated monthly by ITACbefore exportation. • ITAC published amended guidelines on 12 September 2014 to strengthen the administration of the PPS. • ITAC published the intention to review the preferential rates for information and comment on 19 September 2014to have differentiated rates for the different types of scrap metal. • It is the intention of ITAC to conduct an impact study a year from now.

  17. Different and conflicting interests in the value chain of each investigation may lead to court challenges by parties that stand to loose. In respect of court cases, ITAC appeared in domestic courts 24 times (High, Supreme and Constitutional courts) since its establishment. Out of the 24 cases, 16 were ruled in favour and 8 against ITAC (the eight were mostly in the early days of ITAC). Other jurisdictions face similar challenges, although in differing degrees. There is also the WTO Dispute Settlement Mechanism within which government to government disputes are addressed. Judicial Reviews

  18. Corporate Governance COMPLIANCE & INTERNAL CONTROLS • 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 include amongst others the following: PFMA; Treasury Regulations; PPPFA and relevant SCM regulations; etc. The checklists have been developed to assist in enhancing compliance and any identified non-compliances are addressed. • 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.

  19. Corporate Governance Continued RISK MANAGEMENT AUDIT COMMITTEE REPORT • ITAC has risk management unit that conducts risk assessment continuously and then present the risk register to the Risk Management Committee (RMC) for review. Those risks whose status has changed are referred to the Internal Audit Unit to perform independent test of whether the Risk Register is a true reflection of the organisational risks before the RMC can recommend it for approval by Chief Commissioner (CC). • ITAC Executive Committee monitored the internal controls and relevant risk management processes for 2013/2014 financial year and is satisfied with their effectiveness. • The RMC played the role of reviewing the organisational risks and made recommendations for improvement on risk management activities implemented by management. • The Audit Committee (AC) held four normal meetings and one special meeting 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 AC is satisfied with the content and quality of monthly and quarterly reports prepared by ITAC management. • The AC is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to ITAC in its audit.

  20. Auditor General Report IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE • Irregular Expenditure for ITAC in 2013/2014 amounts to R391 621.00, of which • R 185 640.00 is the recognition of the irregular expenditure identified by AGSA in 2011/2012 audit for the actual expenses of continuing contracts where evaluation criteria was not specified when requesting quotations. The contracts will end in the financial year 2014/2015. • During 2013/2014 ITAC an incurred irregular expenditure of R205 981.00 which relates to awarding of BEE Contribution points to a service provider who did not submit a BEE Certificate when quoting and for the submission of a copy instead of an original Tax Clearance Certificate. The break down of this irregular expenditure amount (R205 981.00) is as follows:- • 1. R147 690.00 in relation to procurement without a BEE Certificate. • 2. R58 291.00 in relation to procurement with a copy instead of an • original tax clearance certificate. • In 2013/2014 ITAC did not incur any fruitless and wasteful expenditure. • The Chief Commissioner has approved the condonation of the above mentioned irregular expenditures and relevant correspondence has been sent to the National Treasury and AG’s Office as required by SCM regulation.

  21. Auditor General Report Continued OPINION OF AUDITOR GENERAL • ITAC has obtained an unqualified opinion in 2013/ 2014 financial year. IMPLEMENTATION OF AUDIT RECOMMENDATIONS • ITAC has developed an Audit Action Plan template with clear actions to be taken to address the audit findings relating to compliance as identified by AGSA. • Some of the findings have already been addressed and progress is being reported on other outstanding findings. • Internal Audit Unit has been given the responsibility to examine as part of its audit process the Audit Action Plan to test whether the proposed or implemented actions will or have addressed the AG findings. • The Executive Committee also plays the role of monitoring the implementation of the action plan through a report presented on Action Plan progress on implementation.

  22. Financial Position • ITAC has a sound financial position as assets are more than its liabilities. Total assets amount to R33.8 million and total liabilities amount to R12.6 million • The graphic presentation of total assets of R33.8 million is reflected below. OPERATING RESULTS – TOTAL ASSETS FOR 2013-2014

  23. Financial Position Continued • The graphic presentation of total liabilities of R12.6 million is reflected below. OPERATING RESULTS – TOTAL LIABILITIES FOR 2013-2014

  24. Financial Performance • ITAC’s total revenue amounts to R82 million and total expenditure amounts to R82.9 million and there was a deficit of R890 163 in 2013-2014. The expenses above budget which resulted in deficit were financed from approved retained surplus. OPERATING RESULTS - REVENUE AND EXPENSES

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

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