Brexiteers blamed immigrants and we blame imports

Increasingly, President Cyril Ramaphosa’s plans to get us out of our economic hole remind me of Brexit and Boris Johnson. “Hope is being placed on the ‘Brexit dividend’,” writes the Financial Times’ Martin Wolf, of Johnson, “of restricting immigration of low-skilled people. But delivering a high wage, high productivity and yet high-employment economy in such a way is impossible.”

Here, Ramaphosa has made two big bets. First, an R800bn infrastructure programme where government and the private sector build new harbours, roads and pipelines. And on localisation, punishing imports across a wide range of products so they can be made here instead to “create” jobs.

It all sounds wonderful but he has yet to land a single infrastructure deal and localisation of manufacturing has become a protection racket where government preserves union jobs and Big Business enjoys less competition and bigger margins.

The creation of new unionised (i.e. “decent”) jobs as localisation proceeds is hard to spot. In fact, where state actors like the Industrial Development Corporation (IDC) do put numbers to their efforts, they are merely listed as “jobs retained”.

Recent evidence of our new command economy is the designation of cement. It means no state contract can imported cement. PPC shares shot up on the news. But imports of cement are just over 1-million tonnes a year. Local cementmaking capacity is about 20-million tonnes, meaning imports take about 5% of the market when it’s busy. But there’s so little construction going on, the cement industry is already operating way below capacity and unlikely to create any jobs, despite the injunction.

The order does, however, directly threaten Cemza, a flashy new R600m foreign investment in the Coega SEZ as the cement made there has no access to local clinker. So it has been importing, which now rules it out of government business. For a price, PPC or Lafarge will no doubt oblige.

As Brexiteers blamed their woes on immigrants, we now blame imports. And as the British taste the unintended consequences of their own hubris, so will we. In poultry, local producers cry “imports are ruining us” as they too run for government cover.

But of the current SA poultry market, imports are less than 20% and most of that is mechanically deboned chicken for use in vienna sausages and other processed products and which is not even produced at all in SA. Yet we have imposed stiff new poultry tariffs and seek massive dumping charges when less than 10% of the local market is taken by imported pieces. Are we that lame?

Industry minister Ebrahim Patel banned the export of scrap metal last year, purportedly to feed a stream of new foundries in the black industrialist programme and to feed Scaw Metals, which the IDC bought in 2010 and recently offloaded to a private buyer.

The ban has been extended for another two years, despite the Treasury also imposing an export tax on scrap.

A preferential pricing system means scrap may be exported only when a local user doesn’t want it. Even then the “buyer” doesn’t have to pay or take delivery – the scrap merchant has to hold it. And when the user wants the metal, the merchant pays delivery. The result? Scrap yards filled to bursting and spreading disincentive to collect it.

The same fate threatens scrap paper, which is now harder to export. The beneficiaries? Big paper and packaging groups like Sappi, Mondi, Neopack, KimberlyClark

and Mpact and their unionised, centrally-bargained employees. The losers; scrap paper collectors further down the chain. Last year Mpact collected 662,000 tonnes of scrap and reported operating profits of R631m. Exports of scrap paper were just 120,000 tonnes.

Patel and Ramaphosa have effortlessly drawn business into their game. CEOs have become localisation “champions”. The Toyota SA CEO is Patel’s auto components champion. Anglo American’s CEO is his mining equipment champion. The Foschini CEO is clothing and footwear champion, and even a former WBHO CEO, the devil incarnate when Patel bust the construction cartel colluding to finish the 2010 stadia on time, is the minister’s cement champion. For big business, what’s not to like? Margin for nothing and your cheques for free ...

The laws that once trapped the construction firms have been relaxed to make “co-operation” suddenly possible; but outside the charmed circle employers are hurting. The Government Gazette of March 16 carries a plea from a steel merchant for a rebate on flat rolled coil 600mm wide, because Arcelor Mittal South Africa doesn’t produce it. Six months on, still no decision. It reeks of malice.

On June 19 last year the International Trade

Administration Commission (Itac) the trade regulation arm of the department of trade, industry & competition, gazetted a request from AMSA and others for the imposition of an enormous 120% safeguard duty on a wide range of imported steel sections, complaining they were experiencing “serious injury” from them.

Itac investigators reported on November 6 that there was, in fact, absolutely no sign of any imports surge or injury and because of it recommended Patel drop the complaint. He then waited 10 months before allowing Itac to declare just last month that its final determination was the same as its first.

In all that time no merchant or fabricator would have dreamed of placing an import order with a safeguard duty of 120% hanging over their head.

So, job done anyway. The little guys are such losers.

PATEL AND RAMAPHOSA HAVE EFFORTLESSLY DRAWN BUSINESS INTO THEIR GAME. CEOS HAVE BECOME LOCALISATION ‘CHAMPIONS’

FOR BIG BUSINESS, WHAT’S NOT TO LIKE? MARGIN FOR NOTHING AND YOUR CHEQUES FOR FREE ...