ITAC Annual Report 2014/2015: Tariff Investigations, Trade Remedies, and Import/Export Control

1. Annual Report (2014/2015) Presentation to the Portfolio Committee on Economic Development 3 November 2015 Siyabulela Tsengiwe Chief Commissioner

2. Introduction. Tariff Investigations. Trade Remedies. Import and Export Control. Human Resources Management Corporate Governance. Auditor General’s Report. Financial Performance. Contents

3. Economic conditions continue to be tough globally and domestically as a result ITAC is witnessing increasing applications for support by domestic producers. The year 2012/13 saw the highest number of tariff increases since 2003. The total number of product specific tariff increases was nine in 2012/13, declining to six in 2013/14 however, for the year under review (2014/15) we are back at nine individual product tariff increases. Introduction

4. Introduction TREND ANALYSIS OF TARIFF INCREASES FOR THE PERIOD 2003 -2015

5. Looking at the trend of tariff increases since the establishment of ITAC in 2003 up to 2014, it can be observed that, from 2003 to 2008, there was a downward trend in tariff increases and this is explained by government’s policy approach and the relative good economic conditions globally and domestically at the time. From 2009, an upward trend in tariff increases was evident as a result of the negative effects of the global economic crisis, domestic cost pressures and the shift towards developmental trade policies. An examination of the trend in tariff reductions from 2003 to 2014 reveals the reverse of what has been observed with regard to tariff increases. From the foregoing it can be said, without fear of contradiction, that since its establishment 12 years ago, ITAC has been adaptive and flexible in the execution of its mandate in response to changing economic conditions and government's policy evolution. In tariff investigations our turnaround times were met except for customs tariff increases. In trade remedies the turnaround times for the original investigations were not achieved, however in respect of sunset reviews the targets were met. In import and export control all the set targets were achieved. Introduction

6. The nature of the work of ITAC is such that it impacts on the bottom line and share prices of firms. The stakes are therefore very high for business interests affected in each investigation. In almost all the investigations that ITAC conducts there are different and conflicting interests depending on where one is located in that value chain. The outcomes of the investigations are such that there are winners and losers. Due to increased activity on the part of ITAC in particular at the onset of the global economic crisis and tough domestic economic conditions we have witnessed lately an increase in court challenges where ITAC has had to defend its actions. Introduction

7. Tariff Investigations Completed During 2014\2015

8. Tariff Investigations Completed During 2014\2015

9. Steel Investigations: Update ONGOING INVESTIGATIONS

10. Steel Investigations: Update ONGOING INVESTIGATIONS FINALISED INVESTIGATIONS

11. Administration of APDP AUTOMOTIVE PRODUCTION AND DEVELOPMENT PROGRAM (APDP) • On 01 January 2013 the APDP replaced the then Motor Industry Development Program (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. • thedtiis the policy making authority for the APDP & ITAC administers the program. • In terms of the APDP, as per the policy directive, ITAC recommended the inclusion of the components for dumpers designed for off-highway use, under the programme. • Certificates issued under the MIDP: • Productive Asset Allowance Certificate(PAAs) – 55% of the PAA certificates within the set timeframe. • Certificates issued under the APDP: • Eligible Production Certificates (EPCs) – 100% of the EPC certificates within the set timeframe. • Production Rebate Credit Certificates (PRCCs) - 94% of the certificates within the set timeframe.

12. Trade Remedies ORIGINAL INVESTIGATIONS REVIEWS

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

14. Import and Export Control IMPORT PERMITS ISSUED • During 2014/2015 import permits issued amounted to 18 454. 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 • Capital Goods and Mechanical Appliances • Automotive EXPORTPERMITSISSUED • Export permits issued in 2014/2015 amounted to 14 181. The target was 7 500.

15. Controls on scrap metal PRICE PREFERENCE SYSTEM FOR SCRAP METAL EXPORTS (PPS) • During 2013 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.

16. Controls on scrap metalcontinued PRICE PREFERENCE SYSTEM FOR SCRAP METAL EXPORTS (PPS) • 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 reviewed the preferential rates at which scrap metal must be offered for sale locally prior to exportation which were adjusted from a 20% general rate on all scrap metals to 30% for ferrous scrap, 25% for aluminium scrap and to 20% for the remaining scrap metals. • Indications are that the controls are beginning to have a positive effect both in terms of domestic transactions between merchants and consumers as well as exports. • ITAC intends instituting an impact study in the next financial year.

17. The Human Resources (HR) unit aims to create and maintain an environment that supports and develops the well-being and professional skills of ITAC’s employees by providing quality service in the following areas: Health and Wellness: ITAC has procured the services of Careways (Pty) Ltd. Through Careways, a number of health and wellness programmes in the form of professional or clinical counselling for employees as well as other wellness interventions in order to advance a good organisational culture are conducted on an ongoing basis. Some of the interventions we have had in the past include: emotional intelligence; stress management; and the art of happiness. Training, Development and Performance: ITAC has provided 10 training programmes in line with its Workplace Skills Plan in compliance with the Skills Development Act in order to address the skills gap and to further develop the existing talent. Employees have been awarded bursaries to further their studies in different disciplines and furthermore employees have attended workshops and conferences to acquaint themselves with recent developments that are taking place in various professional environments. In addition to economic rewards for performance that is beyond expectations, ITAC has non-economic awards in recognition of excellence for its employees. Human Resources Management

18. Internship Programme: ITAC admitted 15 interns to its internship programme in the period under review and 13 interns got employment within ITAC and 2 interns resigned, taking up external offers. ITAC’s workforce as at 31 March 2015 was 125, Core business:70; and Support services: 55. In addition, there were 11 contract employees in the period under review. The following is the break down in terms of the employee profile: Gender: Males (53%); and Females (47%). Race: African (77%); Whites(16%); Coloured (3%); and Indians (4%). The vacancy rate for the period under review was 4.6%. Human Resources Management

19. Corporate Governance COMPLIANCE & INTERNAL CONTROLS • ITAC as a public entity is required to comply with all applicable legislations and regulations relevant to the public sector. The policies of the entity have been developed after taking into account the relevant and applicable legislation and regulations like, PFMA; ITA Act, Treasury Regulations; PPPFA and relevant SCM regulations, among others. 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 (Audit and Risk) 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.

20. Corporate Governance Continued RISK MANAGEMENT AUDIT COMMITTEE REPORT • The Audit Committee (AC) held four regular meetings and one special meeting during 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. • The Audit Committee has met with the Auditor-General of South Africa to ensure that there are no unresolved issues. Management has taken note of the findings from Auditor- General of South Africa and has put in place an action plan not only to address the findings, but to strengthen controls for the future especially in addressing the enhancement of the Finance function. • ITAC has a risk management unit that conducts risk assessment continuously and then present the risk register to the Risk Management Committee (RMC) for review. • The RMC is a subcommittee of the Audit Committee (AC) which monitors risk management activities and present its work to AC. • The Internal Auditors assist the RMC by reviewing the risk register for any update. • The RMC then recommends for approval by the Chief Commissioner (CC) the reviewed risk register. • ITAC Executive Committee monitored the internal controls and relevant risk management processes for 2014/2015 financial year and is satisfied with their effectiveness.

21. Auditor General Report Continued OPINION OF AUDITOR GENERAL • ITAC has obtained an unqualified opinion in 2014/ 2015 financial year. IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE • ITAC did not incur irregular expenditure during 2014/ 2015 financial year. • There was no fruitless and wasteful expenditure incurred in 2014/ 2015. IMPLEMENTATION OF AUDIT RECOMMENDATIONS • ITAC has developed an Audit Action Plan template with actions to be taken to address the audit findings relating to compliance as identified by AGSA. • Some of the weakness identified during the audit have been addressed and there is constant monitoring of the activities that are still in progress. • The Internal Audit’s three year rolling plan include following up on the audit findings of the AGSA. • The Executive Committee also plays the role of monitoring the implementation of the action plan through a report presented on implementation.

22. Financial Position • ITAC is in a sound financial position as assets are more than its liabilities. Total assets amount to R35.4 million and total liabilities amount to R11.3 million OPERATING RESULTS – TOTAL ASSETS FOR 2014-2015

23. Financial Position • ITAC total liabilities amount to R11.3 million and below is graphic presentation OPERATING RESULTS – TOTAL LIABILITIES 2014- 2015

24. Financial Performance • ITAC’s total revenue amounted to R86.9 million. OPERATING RESULTS – REVENUE 2014- 2015

25. Financial Performance • ITAC’s total expenditure amounted to R84,1 million and the surplus per GRAP reporting requirements amounted to R2.6 million for 2014/2015. • Contributors to surplus include: • Reduction in operational costs in particular: international travel; workshops and conferences; advertising and legal fees. • Personnel (average vacancy rate of 5% ) OPERATING RESULTS – EXPENSES 2014 -2015

26. Financial Performance • In light of the fiscal constraints, ITAC has managed to contain costs on some of the cost items without undermining the quantity and quality of its basic services as exemplified below: OPERATING RESULTS – COST CONTAINMENT MEASURES

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