The government's decision to ban the use of imported cement for state infrastructure projects may result in high prices, some industry experts say, but others insist it will save the sector.
Cement and Concrete SA (CCSA) said this week the Treasury had stated that from November 4 the use of imported cement would be prohibited on all government-funded projects.
The cement industry has been lobbying for state protection against cheaper imported cement for several years, but the government’s decision does not extend to private sector projects or the sale of cement to consumers.
Lyal White, an associate of the Brenthurst Foundation, says the banning of imported products is not sustainable.
“It is a knee-jerk and reactive response that does not address the real issue at hand. It is not sustainable, as it suggests ... that local industries are not competitive. By banning imports it undermines the virtues of competitiveness,” he said.
This could lead to “increases in pricing and monopolistic behaviour”.
Saul Levin, executive director at Trade & Industrial Policy Strategies, says the decision on cement imports is aligned with SA’s commitments at the World Trade Organisation.
By banning imports it undermines the virtues of competitiveness
— Lyal White, an associate of the Brenthurst Foundation
He said while localisation would stimulate economic growth and generate more tax revenue, the “concern would only be if the designation results in higher prices that do not create net benefits to the economy. The National Treasury would have done the modelling on this to ensure that it does” benefit the economy.
Other industries seeking government protection include poultry, sugar and makers of sanitaryware such as tiles and basins.
Providing protection against imports in the form of tariffs or bans on certain products is part of the government’s plan to stimulate local procurement and production, and revive distressed local industries.
Deputy minister of trade, industry & competition (DTI) Fikile Majola said in a statement that the government had identified public procurement as a strategic policy instrument to reindustrialise SA by making local production mandatory for certain goods in the public procurement system.
“Localisation means that we can assist the productive sectors of our economy to continue to manufacture locally and the more the country moves towards localisation, the more decent jobs are created. The key to the improvement in our economic outlook has been rising export revenues and this will continue to support our economic growth,” he said.
Economist Azar Jammine said having a partial or complete ban or making it expensive for imported products to enter the market might result in higher inflation. If cheap imports are not permitted then prices might rise and in the case of cement the government might end up paying more.
The more the country moves towards localisation, the more decent jobs are created.
— Fikile Majola, deputy minister of trade, industry & competition
On the other hand, importers were dumping excessive production into SA and that was unfair to local industries. One of the ways to balance this would be for local industries to become competitive enough so they were not vulnerable to imports coming in at cheaper prices, said Jammine.
The government has designated 27 products for local production. These include set-top boxes used to receive digital TV signals, plastic pipes, solar water heater components and canned processed vegetables.
The DTI said the government “is leveraging public expenditure through the procurement system to support local production in SA”.
The preferential procurement regulations that came into effect in December 2011 empower the government to impose conditions for local content and production of certain designated products.
“The decision is informed by the trade balance, import leakage and government’s expenditure. The economic objectives are to increase output, create jobs, exports and contribute positively to the tax base,” the department said.
White said protectionism was not a healthy response or solution to job creation in the long run. It was often used as a populist measure in hard times as it was construed as a form of stimulation.
But for the cement industry, the government’s decision is a welcome boost.
Bryan Perrie, CEO of Cement and Concrete SA, said the production capacity of the SA cement industry is about 20-million to 22-million tons a year but current production is running at around 13-million tons. Imports are in excess of 1-million tons a year.
While no cement companies have closed down, some have had to close kilns or furnaces due to the combined effect of imports, Covid-19 and the dire state of the construction industry. Most of the cement companies have had some retrenchments, he said.
The number of tons of cement imported into SA annually.
— IN NUMBERS: 1-million+
“If cheap imports keep on rising there could be further job losses. In addition, most cement plants in SA are located in rural areas and if they had to close because of the imports, this would have a dire effect on jobs and the entire communities in the vicinity of the plants,” said Perrie.
He said imports had all but destroyed local cement production in Kenya.
Although cheaper, imported cement reaching SA may conform to regulatory standards, South African producers have to comply with the Mining Charter, transformation targets, and social and labour plans, but importers don't.
In addition, local producers are subject to the carbon tax, which importers are exempt from, said Perrie.
In the poultry industry, the government’s imposition of tariffs on imported chicken has not helped. The industry has for years been complaining about dumping of chickens from countries with excess production. It has asked for protection against dumping from Brazil, Poland, Spain, Ireland and Denmark.
Izaak Breitenbach, head of South African Poultry Association’s Broiler Organisation, said: “We have not seen a benefit from the tariffs granted... Dumped product just moved from tariffed countries to non-tariffed countries.”
The industry has anti-dumping tariffs against four countries and has supplied evidence of dumping from five more countries.
Breitenbach said the poultry industry, “which is small in global terms, is globally competitive but no industry can compete against illegal and unfair trade”.
The poultry industry produces 21.5-million birds a week or 145,000 tons of poultry meat per month. It is the second-biggest agricultural industry in SA and employs about 50,000 people directly and 110,000 people in the extended value chain.
