Itac raises import duty on batteries to 15%

13 Apr 2015

Business Report, 13 April 2015
By Banele Ginindza

The International Trade Administration Commission (Itac) has increased the import duty on automotive lead-acid batteries from 5 percent to 15 percent with effect from last Friday. The decision follows an application to the commission by Powertech Batteries and First National Battery who had applied for an increase of up to 30 percent.

In a statement on Friday, Itac communications manager Foster Mohale said according to the applicants it was estimated that importers have grown their share of the South African battery market from about 8.5 percent in 2010 to just over 20 percent in 2013. Mohale said the applicants cited in their application that, in recent years, the imported automotive lead-acid batteries have continued to flow into the Southern African Customs Union market (Sacu).

This has had a negative impact on local manufacturers, which has been compounded by the exportation of scrap batteries. “As a result, the local manufacturers have found it increasingly difficult to compete with the imports as the pricing models adopted by foreign manufacturers are often below local costing,” Mohale said.

“They considered this influx of low priced batteries as a threat to sales, market share and employment.”

He said the battery manufacturers had said in their application that the majority of imports originated from South Korea where these manufacturers enjoy government grants and incentives, and a number of battery importers were sending back scrap batteries to the countries where they were originally manufactured, and as a result this raised the cost of domestically recycled lead which makes the local industry uncompetitive.

“The domestic industry has the capacity to produce approximately 5 million automotive batteries per annum, which is more than sufficient to supply the Sacu replacement market demand estimated at approximately 4million units as well as the requirements of the original equipment market,” said Mohale. He said over the period of the investigation, the local manufacturers produced on average 4million batteries per annum.

Following a decline in production volumes between 2012 and 2013, total industry capacity utilisation declined from 77 percent to about 70 percent over the same period. “The domestic industry experiences price disadvantages vis-à-vis foreign manufacturers, in the face of rising domestic production costs and declining profitability,” Mohale said.

He said in considering the application Itac took into account:

  • The increase in the level of imports, and concomitant erosion of the market share of the Sacu manufacturers of automotive lead-acid batteries.
  • The declining profitability of the domestic firms manufacturing the same product, that has negatively affected domestic employment and investment opportunities.
  • The considerable decline in the level of production and capacity utilisation.
  • The price disadvantage experienced by the domestic industry vis-à-vis foreign, especially east Asian manufacturers.