Namibian.com, 03 May 2017
By Maria Immanuel
MARIA IMMANUEL NAMIBIA hardly uses rebate facilities provided in the Southern African Customs Union (Sacu) agreement of 2002 as a policy instrument designed to stimulate manufacturing in the country.
In fact, only South Africa has actively and continuously taken advantage of the rebates to support and promote industries and other developmental projects. The entire automotive industry in South Africa is built on rebates, in fact, the Gautrain and the 2010 World Cup infrastructure also benefited from rebate facilities.
The main objective of rebate provisions in Sacu is to provide a customs duty waiver on imported goods meant for both industrial and agricultural production.
If the Sacu market is unable to produce sufficient amounts of products required as an industrial or agricultural input for certain critical applications, or capital item, and such products attract an import duty, a rebate facility can be created to give relief to manufacturers when importing such products for their production purposes.
According to the International Trade Administration Commission (ITAC) of South Africa, industry may also apply for a rebate or refund of duty on inputs used in goods destined for export. The rebate or refund of the duty levied on inputs used in exports is an incentive for allowing manufacturers to source their intermediate materials and component inputs at world prices.
ITAC is the de facto institution managing the tariff system in Sacu. In other words, every rebate, drawback, tariff increase or decrease is effected under ITAC processes as they have the mandate to represent the Sacu tariff board as per the Sacu agreement of 2002.
Because Sacu has a common external tariff (CET) which governs the 'customs union', all Sacu members – Botswana, Lesotho, Namibia, South Africa and Swaziland – have one customs and excise tariff book, and products imported by any member are levied duty only once at the port of entry (which can only be either through South African ports or Namibian ports).
And because this makes Sacu a single customs territory or 'one market', these imports then move between Sacu members without paying any additional customs duty.
This simply means, if you import chicken from the EU through the port of Walvis Bay, you can export them to other Sacu members without paying any more customs duties at border of the country of destination.
Namibia so far has only utilised rebates on wheat and dairy products. A wheat rebate in Sacu was created in 1996 after South Africa's move to deregulate the wheat sector.
Generally, Sacu does not produce sufficient wheat and after Sacu implemented an import tariff to protect Sacu producers, mainly South African farmers, this negatively impacted on Namibia because Namibia is a net importer of wheat. This meant that Namibian industries needed to source wheat from the rest of the world to produce value added wheat products such as pasta.
The creation of the wheat rebate facility to Botswana, Lesotho, Namibia and Swaziland (BLNS), was to allow these countries to diversify their economies, compete with foreign products in their domestic market and ensure national food security through the marketing of affordable wheat and wheaten products to consumers.
Namibia's wheat rebate quota in 1996 was set at 50 000 tonnes per year, and it was later increased to the current 80 000 tonnes per year. The increase was because of an increase in domestic demand. Namibia is again requesting this quota to be increased to 120 000 tonnes per year to make sure the local demand of wheat is met. This proposal is still under Sacu consideration.
This wheat rebate facility is currently only utilised mainly by companies producing pasta and other wheaten products.
The dairy industry is also utilising a rebate facility and for Namibia, the dairy rebates are 400 tonnes for butter, 300 tonnes for cheese, 700 tonnes for skimmed milk products and 400 tonnes for whole milk products to be imported per year.
HOW TO APPLY FOR REBATES
Presently, the two agricultural rebates available for Namibia are administered by the Ministry of Agriculture, Water and Forestry. The ministry sends out invitations to the private sector through media and individual companies apply to the ministry as per the terms and conditions.
For industrial rebates, companies are technically supposed to apply directly to ITAC since it has the special mandate to manage Sacu tariff systems and also the fact that Namibia does not have a national tariff board to coordinate rebate and tariff processes with ITAC.
However, apart from the agricultural rebates, Namibia does not have cases of applying for industrial rebates hence it becomes difficult to trace how the process was done or how it should be done. In the interim, until the Namibia Board of Tariffs is institutionalised, the Ministry of Industrialisation, Trade, and SME Developments, Import/Export division is the first stop for information on industrial rebate applications.
The rebate schedule 4 provisions as contained in the Customs and Excise Act of 1964, (RSA Act), gives special reference to BLNS on how to create rebate facilities for their industries.
Schedule 4 on general rebates reads: “Goods imported for any purposes agreed upon between the governments of Botswana, Lesotho, Namibia and Swaziland qualify for full duty rebate provided that;
The provision of this rebate item shall not apply in respect of any consignment, or quantity or class of goods unless the prior approval of the governments of Botswana, Lesotho, Namibia and Swaziland has been obtained for the application of such provisions in respect of every consignment or quantity or class of goods.
The importation of any goods under this rebate item shall be subject to a certificate issued by ITAC and to other conditions as may be agreed upon by the governments of Botswana, Lesotho, Namibia, Swaziland and;
Goods imported under this rebate item shall not be sold or disposed of to any party who is not entitled to any privileges under the rebate item, or be removed to the area of Botswana, Lesotho, Swaziland or Namibia without the permission of the commissioner.
In addition, Article 20 (2) of the Sacu agreement allows member states to apply for identical rebates, refunds or drawbacks of customs duty on imported goods.
The council of ministers in Sacu shall approve customs duties to be applied to goods imported into the Common Customs Area from outside that area after recommendations from the tariff board.
Under these two legal provisions for rebates, the first one under the general rebate schedule 4 in the tariff book implies that BLNS members are free to create rebate facilities for their industries on condition the governments of BLNS agree between themselves on the item requiring rebate, quantity and class. On the other hand though, the Sacu agreement implies that all Sacu members shall apply for identical rebates on imported goods.
Even with these legal provisions contained both in the Sacu agreement and the customs and excise tariff book, Namibia is struggling to create rebate facilities for its industries.
On agricultural rebates, Namibia had to fight mainly with South Africa to obtain the wheat rebates in 1996. Even the new proposal to increase Namibia's wheat to 120 000 tonnes per annum is still pending after months of having been admitted to the Sacu secretariat.
Namibia has also requested for a rebate facility on sugar because the current sugar trade regime in Sacu does not allow Namibia to develop downstream industries. And also, it restricts Namibia to source sugar competitively from the world market as the import tariff protection applied by Sacu is designed to protect sugar producers in South Africa and Swaziland.
For a non-sugar producing country, it does not make sense to source sugar at high prices because sugar is used in many industrial productions and the high price of inputs is then passed on to consumers.
Rebate facilities can really assist Namibia to promote manufacturing activities and diversify the economy.
The 10 sector growth strategies prioritised by government as the key industries to upgrade and grow value chains will probably be the most to benefit. However, a thorough analysis of the use of rebates in Namibia should be conducted to identify opportunities available for the private sector.
A clear legal opinion on the interpretation of the available rebates and application process for Namibia is also critical to obtain, so there is a clear understanding on how Namibia and other BLNS countries should utilise rebates in the customs union arrangement.
It is also critical for Namibia to finalise and set up the National Board of Trade responsible for coordinating Sacu matters such as rebates and tariffs on behalf of Namibia.
I would say it is because of the lack of such a body that Namibia has no coordinated effort with South Africa's ITAC to utilise available trade policy instruments to stimulate and promote the country's industrial base. The main purpose of offering rebates is to encourage new investments in manufacturing, to create jobs and to increase economies of scale for both domestic and export markets.
*Analysis done by Maria Immanuel, senior trade & investment analyst at the Namibia Trade Forum