Minister of trade, industry & competition Parks Tau has ordered a review to consider trade policy instruments available to the government to shield paper products companies from extinction as cheap imports flood the market.
Tau’s move comes after industry majors Sappi and Mondi raised red flags about the imports making their way in South Africa, with the toilet paper market also coming under strain.
The review, to be conducted by the International Trade Administration Commission (Itac), might see South Africa slap importers with harsher tariffs to level the playing field with domestic producers.
“The South African pulp and paper industry is under tremendous strain, particularly in the uncoated paper, newsprint, packaging and tissue segments. The sector has raised concerns about the growing challenges of rising import penetration, declining demand for print paper and the slowdown in the domestic economy,” the department said in a government notice.
“The South African pulp and paper industry has made substantial investments in recent years and currently possesses technological innovation, sufficient installed production capacity, and over the past seven years, more than R33bn has been invested in the sector.
“The sector’s processing capacity is highly intertwined with the virgin fibre production as well as the recycled fibre, supporting a wide range of enterprises and employment.”
Sappi earlier this year asked the South African government to impose a 5% tariff on imports of newsprint, in rolls or sheets, arguing that without this protection, the local print industry runs the risk of extinction.
Manufactured using virgin wood fibre, Sappi’s newsprint is a preferred grade among local newspaper printers. It has the required strength and runnability for demanding cold- and heat-set converting used in the manufacture of newspapers and advertising inserts.
South Africa’s print industry has been battered by a migration to digital platforms and rising costs of print, which has seen numerous magazines and newspapers shut down or move online.
Sappi, worth R8bn on the JSE, told Business Day in July that toilet paper dumping is the latest concern, with prices being offered in the local market far below the cost of production.
Mondi has also asked for trade protection from South Africa’s authorities as cheap office paper imports flood the market, eating into its revenue in the country where it was founded 60 years ago.
Mondi Rotatrim, which has just undergone a brand refreshing exercise, is one of South Africa’s most recognised premium office paper brands.
Mondi is worth R80bn on the JSE.
Packaging manufacturer Mpact earlier this year issued retrenchment notices in its carton board business, which has been overwhelmed by cheaper imports and the strengthening rand.
The notice issued warnings that increasing input costs, particularly electricity and transportation expenses, are placing significant pressure on local manufacturers and squeezing local producers’ profit margins.
“If these challenges are not effectively addressed, the economy risks losing significant industrial investments, employment opportunities and the economic sustainability of many rural communities that depend on the sector,” Itac said.
“The minister indicated that Itac may consider, inter alia, potential injury to the industry and its upstream activities due to the concern of rising imports; the latest trade statistics following US trade policy, the recent war in the Middle East; the conditions in the domestic and global markets; exchange rate fluctuations and other related factors.”
Business Day
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