When the decision is taken to levy an import duty on a product, it is not as simple as claiming that it protects the local producer (localisation) and is therefore good.
We are being sold on the idea that tariffs, or the threat thereof, attract investment, with little evidence that it happens at scale.
Every tariff imposed is also a tax on the consumer and when the consumer is buying solar panels, for example, it raises the cost of electricity.
Solar panels
Until quite recently there was only one solar panel producer in South Africa, ARTsolar, which imported the required solar cells, presumably from China, and assembled them into panels.
The company produced modest volumes compared with domestic demand, and even in what it did produce the range was relatively narrow. Yet it successfully lobbied for a 10% import tariff on solar panels.
The International Trade Administration Commission of South Africa (Itac) and then-trade, industry & competition minister Ebrahim Patel were understandably concerned about the cost-raising effects of these tariffs and insisted on a temporary rebate being instituted.
Temporary rebates allow importers to bring a particular product to South Africa in limited quantities without having to pay the tariff. The limitation is determined by the ability of the local industry to supply, so in theory if you can’t buy it locally you should be able to import it duty-free.
However, in reality the prospective importer goes to Itac and asks for a permit allowing it to import a particular volume over the next 12 months. Once the permit is given, the importer cannot get another permit for another year. You can see how this quickly becomes a problem if your prediction of demand turns out to be too modest.
You could ask someone else to import for you and buy the product from them, but that presumes they have enough spare permit and are inclined to help a competitor. Even if they are, this favour is unlikely to be free of charge, so while you may not pay the 10% tariff you will pay something.
Though racial considerations haven’t seemed to be a factor in the issuing of these permits yet, Itac’s 2026 annual performance plan makes it clear that this will be a consideration when permits are issued in future.
In 2025, R3.5bn was spent on importing solar panels, of which R1.1bn was imported without the benefit of the rebate. A total of R109m was paid in import duties, a cost that has been, or will be, passed on to the consumer.
That will be the case whether consumers buy electricity from Eskom, the panels are used to supply energy directly to an industrial consumer, or even if the panels end up on the roof of your home.
Perhaps it is worth getting consumers to spend more for electricity so we can produce more solar panels in South Africa, but that conclusion is not as obvious as some appear to believe.
First, while the people working at ARTsolar would obviously want to keep their jobs, is it worth spending more than R100m a year for those 150 positions, the number disclosed by ARTSolar when it applied for the duty increase?
Incidentally, it took seven years for the duty to be approved, so clearly no-one thought this was actually important at the time. It is worth reading my previous article on this issue.
The knee-jerk reaction is to argue for those 150 jobs and anyone with a heart should feel empathy. But you can’t fix South Africa’s unemployment problem in 150 job chunks. The trade-off against those jobs, and any future ones that may be created by the policy, is more expensive energy.
If we get to 1,000 people in South Africa assembling solar panels I’d be as shocked as President Cyril Ramaphosa so often is. Should we go to such lengths to protect an assembly operation? Does this improve our economy? It would be interesting for that to be studied.
Local cars
I was recently told off by Henry Pretorius of the Toyota Wessels Institute for Manufacturing Studies for criticising the motor industry subsidy programme. He rightly chastised me for not acknowledging the enormous amount of R172bn value added by making cars locally, but even here we need to be cautious.
The R43bn in subsidies to the sector, a validly contested number from the National Treasury, is a lot of money. The question, as with the solar panels, is not whether we want to make cars (we do!), but whether this is the best way to spend that money.
Subsidies are never free and the price of the programme is that we all pay more for cars. Again, maybe this is a worthwhile trade-off, but to arrive at that conclusion we need to independently review the programme’s costs and benefits.
An underlying problem with industry-level interventions is that it’s always easy to identify the winners, such as ARTsolar and the seven vehicle manufacturers in South Africa. You can list them in parliament. You can quantify the jobs saved. What is far harder — and so much easier to ignore — is the cost of saving those jobs.
We have an extremely interventionist and protectionist industrial policy, which can easily enumerate the winners but has little to no interest in counting the losers. In a moribund economy such as ours the silent cries of the losers are dangerous to ignore. You cannot tariff and subsidise your way to a thriving, competitive economy.
• MacKay is CEO of XA Global Trade Advisors.
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