The recruitment landscape; the opinion on state-owned enterprises from the minister of Public Enterprise; containerisation; renewed support from SACCI for Setas; Flemish support for SA’s SMMEs, and more APSO empowers recruiters to manage the myriad changes in the business environment

The 2011 National Recruitment Conference was hosted by the Association of Personnel Service Organisations (APSO) on 9 and 10 June at the Midrand Conference Centre.

This year’s theme of “Change” was especially apt, given the myriad challenges and changes facing the recruitment sector.

Not least of which, the impending changes to labour legislation promise to drastically alter the recruitment landscape.

Johnny Goldberg, chief operating officer of the Confederation of Associations in the Private Employment Sector, provided an update on current negotiations by the National Economic Development and Labour Council, and was positive about the future regulatory frameworks.

APSO was delighted to host Kevin Green, chief executive officer of the Recruitment & Employment Confederation in London.

He provided delegates with insights into the United Kingdom market and proved that despite increasing access to technology, tighter regulation and heavier price pressures, there are still thriving business opportunities available to professional recruitment companies that offer value and expertise to their clients.

Neren Rau, CEO of the South African Chamber of Commerce and Industry (SACCI), shared the latest figures from the Business Confidence Index, and identified key trends that would likely impact on the South African business community’s need to employ additional people.

Most frightening is the continuation of the high wage demands despite decreasing productivity, especially worrying now that South Africa is being more directly compared to its BRIC (Brazil, Russia, India, China) counterparts.

Without adequate attention to increasing productivity and driving work ethic, South Africa will continue to discourage foreign investors who are critical to the government’s plan of creating five million jobs by 2015.

It was wonderful to have our social partners, representatives from the Department of Labour, United Association of South Africa and Unemployed People’s Party at the conference. The ability to share experiences and learn lessons from our international compatriots will be hugely beneficial in achieving the goal of effective public-private partnerships that assist in reducing unemployment and improving the local labour market for the benefit of all South Africans.

APSO was thrilled with the excellent attendance, hosting nearly 500 delegates across the two days. Feedback was superb, and the time spent away from the office will result in real return on investment as recruitment managers and business owners utilise the information gleaned to navigate their businesses through the uncertain economic environment.

Remarks by Malusi Gigaba, Minister of Public Enterprises, to SACCI in May 2011 at the Crowne Plaza Hotel in Johannesburg

The good story of the World Cup is receding into the distant past, remembered by an increasing few; and the global media, steeped as it is in the practice of Afro-pessimism that they have turned into an ideology, are all too eager to revert to telling the negative story about us.

The manner in which the global superpowers treat and endeavour to trample all over Africa – be it in Libya, Ivory Coast or in the economy as a whole – is a telling testimony of the challenge we face still to lift ourselves by our bootstraps politically, economically and otherwise.

Critical in that is the pursuit of employment and equality.

It is precisely these challenges that the New Growth Path raises as critical, needing urgently to be addressed.

In his article, “After the crisis, a chastened IMF (International Monetary Fund) has emerged”, Joseph Stiglitz quotes the besieged IMF managing director Dominique Strauss-Kahn, who said: “Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda.”

Addressing unemployment, poverty and inequality must be placed at the heart of the policy agenda; and all institutions, political and economic, must be harnessed and galvanised toward that common challenge.

Toward that end, the New Growth Path identifies infrastructure development, among other things, as one of the five key jobs drivers.

This then places the state-owned enterprises (SOEs) in a special position.

The Department of Public Enterprises (DPE) is the shareholder ministry responsible, on behalf of the government, for ensuring the SOEs reporting to it operate efficiently and effectively, and deliver on their respective mandates.

The department’s primary objective is to ensure the state’s shareholdings in these enterprises are financially sustainable and deliver on the government’s strategic objectives in owning the enterprises.

Infrastructure-related SOEs such as Transnet and Eskom are in a powerful position to drive growth in the economy.

Key sectors of the economy are completely dependent on the availability of infrastructure capacity for their existence and growth. Accordingly, the SOEs either constrain growth or they act as a catalyst for additional investment in these sectors.

In this regard, we cannot continue to see them in isolation from the impact they have on their customers and suppliers.

Given their strategic position, SOEs can play a leadership role in both the customer and supplier community in driving programmes that catalyse socio-economic transformation in these sectors.

Consequently, the DPE has a new vision to drive investment, efficiencies and transformation in its portfolio of SOEs, their customers and their suppliers to unlock growth, create jobs and develop skills.

We are presently exploring building partnerships with a range of stakeholders to realise this vision. A few examples:

Firstly, it is well known that South Africa is not taking adequate advantage of the opportunities created by the global commodities boom. This is extremely problematic, particularly as our iron ore and coal exports will earn us significant quantities of foreign exchange which, in and of itself, should accelerate our rate of growth.

Although Transnet has been steadily investing to increase capacity on the key commodity export corridors, this investment is limited by the SOE’s balance sheet capacity, and is insufficient to really unlock new investment and growth in our mining sector.

Consequently, we need new sources of finance to enable a quantum jump in the rate of investment and in the capacity of these corridors.

The DPE will be exploring partnerships with both development finance and mainstream finance institutions to see how equity and quasi-equity finance for these projects can be raised.

The department will be engaging with the large mining houses to explore co-investment relationships, given that these companies have the most to gain through additional investment, but are presently not sharing any of the risk associated with the development of these corridors.

Secondly, the average age of Transnet locomotives is around 33 years. In the United States, the average age of a Class 1 locomotive is 15 years. We need both to bring down the age of the fleet and add significant capacity if we are to unlock the growth potential of Transnet’s customers and move goods from road to rail.

As a result, we are designing an ambitious fleet renewal strategy that will see us procure consistent and significant quantities of both electric and diesel locomotives annually over the next 15 years. This will make South Africa one of the most strategic markets for global locomotive equipment manufacturers, particularly in relation to heavy haul electric models.

Our plan is to partner with the relevant original equipment manufacturers (OEMs) to build South Africa’s locomotive manufacturing capability.

We aim to more than double the quantity of local content embodied in the locomotive and to ensure South Africa becomes a key global manufacturing and niched engineering hub for the relevant OEM.

Thirdly, our SOEs are facing considerable challenges to ensure there is an adequate supply of critical and scarce skills, particularly engineers, technicians and artisans.

This is driven by a large proportion of existing skills reaching retirement age as well as the increased demand caused by the capital investment programmes.

It is clear to us that our SOEs are not alone in facing this challenge, and that many of their suppliers and customers are facing similar constraints.

The SOEs have started partnering with large suppliers to optimise their training capacity, to enhance the quality of output from further education and training (FET) colleges, as well as to provide workplace training.

The DPE is playing a co-ordination role with the Department of Higher Education and Training to access additional resources to ensure SOE training facilities are used to full capacity. We expect to increase artisan output by 60%.

In terms of private participation in the SOE value chain, there is a detailed policy framework and process relating to private sector operational participation in the energy sector.

The Minister of Energy Dipuo Peters is empowered to define the division of labour between Eskom and private producers in delivering on the requirements contained in the Integrated Resource Plan.

The National Treasury has made great progress in the definition of power purchase agreements and in the establishment of the institutional capacity to procure power.

We have made the principled decision to establish an independent systems operator, but this will take some time.

In the port and rail sectors, we are going to focus initially on areas that are complementary to Transnet’s strategy.

This will include areas such as branch line concessioning, innovative proposals to put cargo from road to rail, and reducing road congestion around ports and inland terminal development. We are investigating the establishment of a governance framework to expedite these processes.

I would like to assure you that we will continue to keep a vigilant eye on the sustainability of SAA (South African Airways) so as to ensure the airline continues to provide capacity to enable the flow of businesspeople between South Africa and the rest of the globe.

It has become clear post the global recession, and given the immense social challenges we face, that the importance of a developmental state cannot be overemphasised.

For South Africa not to suffer yet another infrastructure deficit, more visionary thinking, planning and leadership is required of the state.

In pursuing our new vision of driving investment, efficiencies and transformation in its portfolio of SOEs, their customers and their suppliers to unlock growth, create jobs and develop skills, we are acting decisively in pursuit of these goals of placing employment and equity at the heart of our policy agenda.

Further to pursue these, we have to strengthen relations with our stakeholders, especially business, labour, and the provincial and local tiers of government.

With regard to the latter, we need to ensure there is alignment between the capital expenditure programmes of the infrastructure-related SOEs and the development plans of provincial and respective local governments.

On to other matters

SACCI held the first of its annual networking events between political and business leaders on 1 June 2011. The objective was to create a relatively informal platform for interaction between political and business leaders. It was held at the Cape Grace Hotel in Cape Town and hosted in partnership with the Cape Regional Chamber.

Microsoft was the event sponsor, and Microsoft South Africa managing director Mteto Nyati shared the podium with Minister Rob Davies of the Department of Trade and Industry (the dti).

A number of chairs of the Parliamentary Portfolio Committees were also present at the event, and assisted in broadening the scope of the engagement.

The event was highly successful and was oversubscribed.

A number of SACCI-affiliated Chambers from across South Africa were represented. Pictured on the right is the delegation from the Zululand Chamber of Commerce and Industry with Minister Davies.

Merchant Shipping

(Safe Containers Convention) Bill

No one can deny that the advent of containerisation has changed the transportation of goods forever.

The story goes that it was a South African invention formulated around a table while transport experts were having tea.

The talk was: Would it not be great if we had a box that was the size of truck, which could be lifted off the truck and placed on a train, and vice versa?

The result: The birth of containers and global containerisation.

With the global growth of containers, it was inevitable that concerns relating to safety would emerge, leading to an international debate at the International Maritime Organization that culminated in the United Nations Convention for Safe Containers.

The 1972 Convention for Safe Containers has two goals: One is to maintain a high level of safety of human life in the transport and handling of containers by providing generally acceptable test procedures and related strength requirements. The other is to facilitate the international transport of containers by providing uniform international safety regulations, equally applicable to all modes of surface transport. In this way, proliferation of divergent national safety regulations can be avoided.

The Convention includes two annexes: Annex I, which includes regulations for the testing, inspection, approval and maintenance of containers; and Annex II, which covers structural safety requirements and tests, including details of test procedures.

Safety-approved containers are the cornerstone of the Convention; and once approved and plated, it is expected that containers will move in international transport with the minimum of safety control formalities.

South Africa is a signatory of that Convention and, as a result, is obliged to introduce legislation to give effect to it. Thus, the government published the Merchant Shipping (Safe Containers Convention) Bill 2011.

While SACCI agreed with the provisions of the bill, it voiced disappointment that no provision was made for the establishment of testing facilities in South Africa, which could contribute to small business development and to job creation.

SACCI furthermore regretted the omission of provisions that relate to the unsafe transportation of containers that are certified as safe.

Amendments to the sector education and training authorities (Setas)

Grant regulations regarding monies received by a Seta

In its submission to the Department of Higher Education and Training on amendments to the sector education and training authorities (Setas) grant regulations regarding monies received by a Seta, SACCI expressed support for endeavours aimed at improving the skills base in South Africa, which were in line with the New Growth Path and its objective of job creation.

The Setas and the manner in which they operate are of prime concern to the business community. Specifically, SACCI believes that access to skills development for employees is of great importance to small- and medium-size enterprises. The improvement of the skills base will contribute positively to the growth of these businesses and hence to the growth of the economy and to the creation of jobs.

In its comments, SACCI said that it supported the implementation of improved regulations relating to the payment of grants and to the development of parameters according to which discretionary grants are paid in principle. SACCI welcomed the attention that the amendments give to the payment of such grants.

It said that if appropriately provided for, and implemented, the activities identified in the proposed amendments would improve the skills of both existing and potential employees. In turn, this would increase the South African skills pool.

In addition, improvements to regulations had the potential to improve productivity in the workplace, which would contribute to improvements in business activity so badly needed as the country recovered from the recent global downturn.

The proposals made provision for pivotal programmes that referred to professional, vocational, technical and academic learning that results in occupational qualifications and which may include a knowledge component that is normally delivered at a FET college or a university, as well as structured learning in an accredited training centre or an approved workplace.

SACCI saw this as the reintroduction of apprenticeship training which, if appropriately structured, would make a positive contribution to increasing the skills levels – particularly the technical expertise – of young persons and hence provide them with improved job prospects.

In conclusion, SACCI expressed support for the development and introduction of regulations that have the purpose of ensuring the South African skills pool is improved. It believed that by appropriately regulating the operations of Setas, the objective of job creation as encapsulated in the New Growth Path – with the focus on the sectors identified in the Industrial Policy Action Plan 2 – would be facilitated.

The role of the Setas in providing the skills needed to grow the economy and to create jobs was, in SACCI’s view, critically important to the South African economy.

Draft regulations for the conditions of service and appointment of the CEO of a Seta

SACCI believes that the CEO of a Seta has a critical role to play in the development of the skills required by commerce and industry, which will facilitate job creation as detailed in the New Growth Path. For this reason, SACCI commended the Minister of Higher Education and Training Blade Nzimande for publishing regulations that would determine the conditions of service and the appointment of a CEO of a Seta.

In commenting, SACCI said it was of the view that the proposed selection committee that would recommend a suitable candidate had to be drawn from stakeholders.

SACCI supported the development and introduction of regulations for the purpose of ensuring the appointment of CEOs was done in a manner that strengthened the role of the Setas in order to provide the skills needed to grow the economy and to create jobs.

SACCI expressed the hope that with the appointment of CEOs with appropriate qualifications, skills and experience, the Setas would play their rightful role in growing the South African economy.

Back to the drawing board for the Administrative Adjudicators of Road Traffic Offences

The introduction of the road traffic points demerit system encapsulated in the Administrative Adjudication of Road Traffic Offences Act (AARTO) No. 46 of 1998 has generated considerable debate and antagonism over the past several months.

Road safety is of particular concern to business, since every accident constitutes a cost to the economy. For this reason, SACCI supports attempts to improve the level of safety on South African roads, provided that such attempts do not impinge on the ability of business to carry out operations in a cost-effective and efficient manner.

SACCI supports the implementation of a points demerit system in principle. However, it believes that the objective of the Act and its accompanying regulations must have a positive result on economic growth and on the ability of business to operate efficiently. For this reason, SACCI believes the Act must be implemented in a manner that is fair and which does not add to the current burden of red tape to which business – particularly SMEs –
are subject.

SACCI submitted comprehensive comments on the adjudication procedure, including the need to follow up roadside infringement notices by registered mail; and a caution that the authority given to traffic police to determine whether or not to arrest an alleged offender could lead to abuse by the officer and to the offering of bribes by the alleged offender.

It pointed out certain inconsistencies in the draft, including the proviso that an infringement notice had to be sent by registered mail; while a summons needed only be sent by ordinary mail, and that no provision was made for the delivery of a summons by a messenger of the court.

Furthermore, SACCI referred an inherent unfairness in the proposals, in that while a person who was caught – for example, for speeding – at the roadside could be arrested, yet a perpetrator who was caught on camera would only be required to pay an admission of guilt fine or appear before a magistrate.

SACCI noted that a large number of forms were required to give effect to the regulations, and queried whether 33 different forms were really necessary or whether the number could be reduced by combing the information required.

It proposed that the drafters go back to the drawing board and that they eliminate inconsistencies and simplify the procedures before implementation.

Bilateral agreement with the Competition Commission

A long-awaited bilateral agreement between a SACCI delegation and the Competition Commission was held at the SACCI offices. SACCI members were informed about the modi operandi of the Commission and of pitfalls that business faced.

The Commission advised that it needed to prioritise its activities, and that this was premised on two important considerations, namely the need to:

• make efficient use of its resources, which had to be allocated to where the Commission was able to make the greatest impact; and

• improve the effectiveness of the Commission resources allocated to priority areas – food agro-processing and forestry, infrastructure and construction, and intermediate industrial products.

SACCI members were warned that should they not comply with the Competition Act, the Commission would investigate them and take action that it deemed necessary.

The Commission stated that it offered an advisory service to ensure firms that were regulated understood the Competition Act, its interpretation and application to their day-to-day operations. The demand for this service was increasing, and issues raised were becoming more complex.

The service included advisory opinions, clarifications, meetings, training sessions and dissemination of information.

The Commission explained that an advisory opinion was a written opinion of the Commission’s position in respect of a set of facts submitted by external parties. It offered guidance on the application and interpretation of the Competition Act, as well as the approach the Commission was likely to take in respect of certain transactions, agreements or practices.

It was based entirely on the facts provided to it, taking into account relevant case law, policies of the Commission and previous opinions issued. These opinions were not binding on the Commission or the parties requesting them. If based on accurate facts, however, they offered the necessary guidance and clarity to stakeholders.

UNIZO

SACCI recently met with a delegation from UNIZO, a Flemish organisation for self-employed entrepreneurs. It comprises about 1 000 permanent employees and 3 800 entrepreneurs who voluntarily commit to working for the organisation. It has 83 associated professional sectoral organisations active in, among other areas, construction, food agro-processing, textiles, the metalworking industry and distribution.

It provides information, advice, training and specialised services in social, business, tax, legal, environmental/security and industrial relations areas. Members can make use of certain paying services such as accountancy, social secretariat, insurance company, occupational health service, assistance in request permits, and so forth.

The organisation headquarters are in Brussels, and UNIZO operates in 11 regions with 23 regional offices.

It assists small businesses to grow by offering SME information, sessions and conferences, round-table discussions and company visits.

UNIZO visited SACCI with the objective of exploring ways and means of assisting South African entrepreneurs as part of its outreach programme.

SACCI intends to work with the organisation in the interests of the small business community in South Africa.

Launch of the Eskom 49M campaign

With the onset of winter 2011, with its accompanying increase in electricity consumption, concerns were raised regarding the sustainability of electricity supply with the fear of rolling blackouts emerging.

In order to address the issue, Eskom launched the 49M campaign. SACCI was the first organisation to publicly pledge support.

This campaign is very simple in concept: The 49M represents 49 million South Africans, each of whom has a finger that should be used to switch off lights, appliances and other electrical goods when they are not required. This significantly reduces the amount of electricity in use, and hence lowers the risk of blackouts.

An appeal is made to South Africans to make the switching off of lights, plugs and appliances a habit, and thereby reduce the need for new electricity generation. This will not only reduce each individual’s carbon footprint, but contribute to the achievement of South Africa’s national commitment to reduce carbon emissions.

Draft Taxation Laws

Amendment Bills of 2011

SACCI actively takes part in the process to provide public comments into the legislative environment. The recent release of the Draft Taxation Laws Amendment Bills is a case in point.

Through the convening of a tax committee feeding into both SACCI as well as Business Unity South Africa, these inputs are formulated to provide not only the input from business, but also contribute to constructively participating in the process to provide comments and proposals on the proposed tax amendment bills to make current legislation and the tax environment in general more efficient, simpler and transparent.

Some of the comments

Section 3.10 of the explanatory memorandum dealing with small business: micro-business turnover tax relief

Key provisions: 6th Schedule,

paragraph 7 of Appendix 1

The turnover tax system seeks to encourage the informal sector and other small businesses to enter the tax system by lowering the barriers of entry associated with the standard tax system.

In essence, small businesses under the turnover tax system are subject to a low rate of tax on a gross basis without deductions. The turnover tax potentially applies to businesses with an annual turnover of up to R1 million.

Business, however, is concerned that due to the low profit margins of some of these companies, this is not a feasible option.

Furthermore, the envisaged increase in firms registering formally does not occur, as the complex regulatory environment deters firms from moving into the formal sector – not necessarily due to the tax requirements, but rather the regulatory environment.

Section 3.22 Anti-avoidance:

suspension of intra-group rollovers

Key provision: Section 45

Section 45 allows for rollover relief when assets are transferred between members of the same group of companies in exchange for the issue of intra-group shares or of intra-group debt. Unlike other reorganisations, this form of relief creates a market value tax cost in the newly issued shares or debt (as opposed to a rollover tax cost).

Business advises against the removal of Section 45 for the following reasons:

• The removal of the section will negatively impact on the large number of transactions utilising Section 45 as it was envisaged. The removal of the section and the resultant lack of a tax-neutral environment, within a group as envisaged, will provide an environment of significant complexity for any group of significant size and will clearly impact negatively on most investment decisions. Rather, limiting interest deductibility when used outside the envisaged purposes may be a better alternative.

• A significant portion of black economic empowerment (BEE) transactions are conducted using Section 45. These transactions may otherwise be problematic in the absence of a tax-neutral environment to conduct arm’s-length transactions.

Section 3.25: Anti-avoidance:

third-party backed shares

Key provision: Section 8EA: “ordinary treatment without timing requirements”

Stated dividends in respect of shares backed by third parties will be treated as ordinary revenue. This ordinary revenue treatment will cover various forms of third-party backing, all of which will apply without regard to any three-year or other timing requirements.

The lengthening of hybrid shares to 10 years presents numerous difficulties, as very few transactions making use of an instrument of this nature will have a life span of longer than 10 years.

In addition, the significant use of these instruments in BEE transactions, and the ability of the financing institutions to pass on the cost to the end consumer will increase the cost of finance – impacting negatively on all future transactions, including a large share of future BEE transactions making use of a structure utilising these types of instruments.

The retrospective nature of the legislation raises concerns, as this not only increases the regulatory burden, but will probably be found unconstitutional.

Such comments are raised to promote transparency and efficiency in the tax environment in general, and also to lower the cost of doing business to promote employment creation and the eradication of poverty through increased commercial activity.

Export taxes

One of the areas on which SACCI is working is the use of export taxes and the impact that may have on various sectors.

We believe that export taxes may form part of a wider government strategy going forward, and we realised the need for a clear understanding of the impact such an instrument may have on a specific sector, the consumer and the economy as a whole.

This is an extremely complex subject, and work will continue.

An export tax is tax collected on exported goods. As with tariffs, export taxes can be set on a specific or an ad valorem basis. In the US, export taxes are unconstitutional, since the US Constitution contains a clause prohibiting the use thereof. This was imposed due to the concerns of Southern cotton producers who exported much of their product to England and France.

Many other countries employ export taxes, however. For example, Indonesia applies taxes on palm oil exports; Madagascar applies them on vanilla, coffee, pepper and cloves; Russia uses export taxes on petroleum; while Brazil imposed a 40% export tax on sugar in 1996. In December 1995, the European Union imposed a $32 per tonne export tax on wheat.

Like import tariffs, export taxes place an economic wedge between international and domestic prices. With export taxes, domestic prices are pushed down below international prices. This reverses the situation with import tariffs, which elevate domestic prices above international prices.

Export taxes are levied for the following three main reasons:

• To depress domestic prices to protect internal buyers or consumers;

• To reduce the cost of raw material inputs for infant industries; and

• To generate revenue for the government.

Most of these effects occur when an export tax is levied, but generally one of them is dominant.

Alternatively, in South Africa’s case, the commodity boom and the simultaneous high levels of copper prices provide for an argument to impose export taxes on something such as scrap metal; however, the full impact of imposing an export tax will need to be studied.

The total effect of export taxes can be summarised as follows: Export taxes protect consumers at the expense of domestic farmers or producers, export merchants, and foreign buyers. In addition, the government receives tax revenue.

Specifically, the economic impact of export taxes has varied globally, depending on the following:

• Type of commodity upon which the tax is imposed;

• Ability of the producing country to pass on the cost of the tax internationally; and

• Structure of the downstream industry or consumer market.

It is clear that the international experience has shown that export taxes only work as a development tool under very rare conditions and that they generally have damaging effects on the economy, particularly if imposed for long periods of time.

To avoid unintended economic costs and consequences, an application for an export tax must demonstrate that the particular goods or commodity meets the following criteria:

• The local industry has sufficient international market share in the particular commodity to affect the global price;

• International demand for the commodity will not fall significantly in response to the higher price (i.e. international demand is inelastic and there are no close substitutes for the goods); and

• South Africa is self-sufficient in the product or commodity (i.e. there are no or minimal imports).

If any of the above are not met, there will be a net cost to the local economy with a transfer or rents from the producing to the consuming industries. In such cases, an export tax is unlikely to be viewed as the optimal policy instrument to promote industrial development, since the costs of the tax to the broader economy are likely to outweigh the benefits to a particular industry.

The net cost can be assessed by examining the structure and competitiveness of the upstream and downstream industries, and the potential employment effects. Importantly, it must be shown that the net benefits outweigh the costs before an export tax can be recommended on a product that does not meet the criteria listed above.

SACCI proposes these questions be answered to identify costs and benefits of export taxes and alternative policy options:

• What is the reason for imposing an export tax on a particular product –revenue-raising or industrial policy?

• Is the domestic price too high, or is domestic supply insufficient? If so, why? To address market failures? If so, what alternatives?

• Is the industry competitive? If not, why?

• How will output, employment and investment be affected in the taxed industry?

• Can the cost of the tax be passed on to international consumers?

• What proportion of domestic output is exported? Are there differences between firms that export and those that supply the local market?

• Will the benefit of the tax be passed on to downstream users? If not, why?

• What is the structure of the downstream industry?

• Is this industry internationally competitive without a tax? If not, why?

• Is the industry characterised by high levels of concentration?

• Is there vertical integration between upstream and downstream producers?

• Is the industry capital- or employment-intensive?

• What is the capacity of the downstream industry to absorb increased supply of the taxed commodity?

• What other policy tools could be utilised to address industry concerns more directly?

• What is the net effect of the tax on job creation between the upstream and downstream industries?

It is clear that the concept of export taxes is not only very complex, but the consequences of imposing an export tax may lead to a number of unintended effects.

Without arguing for or against export taxes in principle, SACCI feels it is worthwhile to develop the way we should think about instruments such as these. Answering the questions above may provide some understanding of a specific case, and assist in the decision-making.

Copper theft – a serious threat to the economy and the country

Theft of copper (and aluminium) has existed for many years, but has escalated since 1993 to such an extent that losses run into millions of rands annually because of the rise in the price of copper.

The impact of non-ferrous metal theft on industry and the South African economy is enormous, affecting a large variety of industries and making it difficult to quantify the real impact on the country’s economy, organisations and individuals.

It impacts negatively on the private and public business sectors where there is a consequential loss of essential services (including telecommunications, transport and electricity). This impacts negatively on productivity, planning and profit margins and the gross domestic product.

It has been practical over the years to make use of the direct financial cost of replacing copper cable stolen from three national service providers – Telkom, Transnet and Eskom – to monitor the trends in copper theft.

Between 1998 and 2006, the direct losses of the above organisations increased from R204.7m to R228m, and the incidents from 4 429 to 17 632.

The estimated total cost to Telkom, Transnet and Eskom in 2006 was R800m, while the cost to the economy in 2006 was in excess of R1bn.

The SACCI Copper Theft Barometer uses equivalent figures in monthly press releases to create an increased awareness to the public of the extent and impact of this crime. The current levels of non-ferrous metals theft are contained in the current Copper Theft Barometers.

The Non-Ferrous Theft Combating Committee (NFTCC) was formed in 1993, on which all major role-players were represented to provide strategic guidance and direction for the process of prevention of the crime to ensure continuity of essential services. Business Against Crime South Africa (BAC) joined forces with the NFTCC in 2001.

In 2007, the NFTCC was handed over to the South African Police Service (SAPS) and renamed the Non-Ferrous Metals Combating Committee (NFMCC).

Leadership of this initiative by the SAPS was considered to be crucial to its success.

Measures implemented, and which have experienced levels of success in combating non-ferrous metals theft to date, include:

• Acceptance of the crime as a reality in Africa, requiring aggressive proactive measures and good strategic thinking using all possible expertise.

• The processing by the three parastatals over the years of the number of incidents of theft and the cost of replacing the cable to Eskom, Telkom and Transnet (Spoornet); and by the SAPS from information supplied by parastatals, metros, municipalities, Metrorail and various other industries. These statistics have shown the increasing trend since 2005 to date.

• The apprehension of organised crime syndicates and ‘bread and butter’ thieves who are now in custody through proactive patrols, air support, aggressive policing of the scrap market and intelligence-driven operations in hot spots. Bread and butter thieves, operating in small groups with minimum planning are, however, more difficult to apprehend by means of intelligence-driven operations.

• Concerted implementation of anti-non-ferrous metals theft initiatives internally by the affected parties including increased capacity deployed by private contractors employed, research into and use of technology (e.g. cable marking), use of contractors in proactive patrols and in intelligence-driven operations in hot spots with air support, ongoing public awareness initiatives aimed at relevant government departments – SAPS, the dti, International Trade Administration Commission (ITAC) and the National Prosecuting Authority – as well as the general public, and interaction and co-operation between government departments and industry role-players through the NFMCC.

• Information flow – central database has been created within national crime intelligence (SAPS). This is currently being populated with information from SAPS, industry and other government departments for analysis.

• The treatment by SAPS of non-ferrous metals theft as a priority crime due to its negative impact on the economy.

• An export duty on scrap metals, which will not contravene the principles of the World Trade Organization, is currently being explored by BAC.

• Involvement of vital government stakeholders in combating it – Asset Forfeiture Unit, the dti, ITAC, South African Revenue Service (SARS) and various components of SAPS not previously involved.

• Industry support of SAPS and other law enforcement agencies by the sharing of information.

• Identification of problems within the export market, requiring scrutiny of current associated legislation, policies, regulations and trade agreements and active involvement in their enhancement.

• The Second-Hand Goods Act is being revised and is currently with SAPS, which will define the regulatory requirement of the industry (but it remains unclear if the legislative need of the industry will be satisfied through its enactment).

• Championing of anti-copper-theft by senior government and business representatives.

Factors contributing to the perpetration of non-ferrous metals theft include:

• Weak export control measures currently in place – anyone can apply for an export permit to export non-ferrous metals (Basel Convention applies). ITAC believes the International Trade Administration Act needs to be changed;

• Weak inspection measures of containers due to lack of resources – one X-ray machine available nationally;

• Increasing price of copper, making copper theft a lucrative illegal business;

• Increasing demand for copper locally and internationally;

• Increasing numbers of unemployed;

• Increasing number of illegal immigrants involved;

• Involvement of organised groups or syndicates;

• Insufficient control or legislation regarding processing, sale, import or export of non-ferrous metals;

• Low risk in accessing some cable networks (low voltage);

• Accessibility to cable networks; and

• The most important contributing factor is the readily available scrap market through which stolen material is routed back into the chain of processing, manufacturing, supply and export without adequate regulation – making it difficult to police effectively. The market for stolen non-ferrous metals remains, primarily, the local recycling industry. About 75% of all scrap metal generated in South Africa is handled by the formal sector and the remainder by the large number of informal businesses. The estimated turnover of the recycling industry is currently estimated to be in excess of R15bn per annum. Cable theft continues to pose a serious threat to the economy and to the country.