import tax

BEST Interview: On April 10 South Africa's import tax on lead-acid batteries rose to 15% following a decision by the International Trade Administration Commission (ITAC).

The decision followed lobbying from Powertech Batteries and First National Battery (FNB), who applied for the tax increase on batteries to rise from 5% to 30%.

In this exclusive interview, Glenn Geldenhuis, the CEO of Powertech Batteries, explains why South Africa's lead-acid industry needed a 200% rise in import tax.

BEST: Why did you company lobby for the rise in import duty for lead-acid batteries?

Geldenhuis: The South African Battery Manufacturers’ Association applied for the duty protection and all the local manufacturers were part of this SABMA initiative.

Powertech Batteries welcomes the International Trade Administration Commission (ITAC) of South Africa’s recommendation to increase import duties on automotive lead-acid batteries from 5% to 15% as a step in the right direction. However, it is important to note that this is only half of the bound rate of 30% proposed by the industry. Tightening protective measures for local battery manufacturers is critical in ensuring the long-term sustainability and growth of the South African domestic battery market - and, subsequently, the local economy – and we will continue to collaborate with industry players and legislators in pursuit of this objective.

It should be noted that the local manufacturers made and continue to make substantial investments in manufacturing, product development and skills upliftment.

BEST: Could you explain the reasons for wanting the rise and how is it going to affect the domestic lead-acid battery market?

Geldenhuis: In recent years the number of automotive lead-acid batteries imported into South Africa has increased significantly. As a result, local manufacturers have found it increasingly difficult to compete with the imports as the pricing models adopted by foreign manufacturers are often below local costs. This influx of low priced batteries is a threat to the local battery industry which may have followed the same route as the textile industry.

The majority of the imports originate from South Korea and China where these manufacturers enjoy government support and labour and economic advantages. Furthermore the importers don’t recycle the scrap batteries and this scrap is exported by scrap dealers- in many cases illegally. This raises the overall cost of lead domestically which makes the local manufacturing uncompetitive and uneconomical. It is estimated that importers have grown their share of the South African battery market from about 8.5% in 2010 to just over 20% in 2013. The imported batteries increased with 17.8% year on year (2014 vs 2013) vs a market growth of less than 4%. Thus, this has had a significant negative impact on local manufacturers, which has been compounded by the exportation of scrap batteries.

BEST: How is it going to affect the domestic lead-acid battery market?

Geldenhuis: Imports from the European Union (EU) are excluded from any tariff increase and make up a large percentage of the imports. Furthermore, there are three local manufactures competing in this market. It is therefore not foreseen to have any direct effect on the domestic lead-acid battery market. There will be resourcing from some importers to European suppliers – this is happening already.

This will make the local manufacturers more competitive and free up resources for investments in technology, production, skills development, etc. The long term result will be that the local products will improve. From a SABMA perspective we believe the increase in duty would ensure a levelling of the playing field.