Coatings World - October 2016

Africa

terms of Customs and Trade Agreements with the EU – and another 20 percent from the USA, on which only 10 percent import duties apply,” Spence told South Africa media.

“Now there are strong indications that more overseas countries, such as India in particular, are regarding South Africa as a lucrative export destination to be targeted on a large scale,” he said.

Spence said a large share of the paint
imports are “mainly specialized, solvent-
based paints – such as for the marine and
automotive sectors – but there is every indi-
cation that dumping of paints much more
competitive to the local industry are also
earmarked for dumping in South Africa.”
“Although the paint now imported
from Europe and the USA are generally of
an acceptable standard, there is no guar-
antee that the same could be said of future
imports from new sources,” said Spence.

He proposed raising of import duties on imported paints 15, except for the duty-free paints from Europe, to create fair competition in the industry and stop increasing dumping of the products in South Africa.

Currently, South Africa levies three
types of import duties on imported
goods, which include the anti-dumping
and countervailing duties. This duty is
for imports “considered being ‘dumped’
in South Africa and subsidized.”
According to South Africa’s South
African Revenue Service, imports that at-
tract antidumping duty “are the subject
of investigations into pricing and export
incentives in their country of origin.”
“The rate imposed will depend on the
result of the investigations and can either
be based on ad valorem (as a percentage
of the value of goods) or as a specific duty
(as cents per a unit).”
ITAC was quoted in early September
saying despite the concerns by SAPMA,
there is no specific manufacturer who has
launched a complaint or request for in-
creasing of the import tariffs as required
by law to enable it launch an investiga-
tion into the proposal propagated by the
Spence-led association.

“SAPMA intends acting on the ITAC
directive and will now approach a suit-
able producer member to urgently lodge
an appeal for ITAC to investigate the
matter of raising import duties as soon as
possible,” said Spence.

An estimated 40 percent of the paints in South Africa are distributed through the manufacturers’ owned professional wholesale depots, while the manufacturers’ owned Do-It-Yourself (DIY) outlets, hardware outlets and superstores/ware-houses distribute 15 percent, 25 percent and 20 percent of the paints respectively according to a recent report by the Remburssi – Association of International Business, which is a group made of Aalto University students who are interested in international business.

Despite the structured distribution of
paints in South Africa, the industry, has in
addition to unregulated paints importa-
tion and dumping, continued to face other
challenges that hinder it from contributing
to the country’s economic growth, which
the World Bank projects will this year
stagnate at the 2.4 percent achieved in
2015 “due to a combination of domestic
constrains and external headwinds aris-
ing from the fall in commodity prices and
slowdown of the Chinese economy.”
Kansai Plascon Africa Ltd, which
came into being in 2012 after the renam-
ing of Plascon South Africa in a merger
with Japan’s Kansai Paint, the world’s
sixth largest coatings company, saw its
performance deteriorate according to the
global company’s annual report for the
year ending March 31.

Kansai Paint president and representa-
tive director Hiroshi Ishino said in March
“business results deteriorated in Africa be-
cause of factors including an economic slump
in South Africa and neighboring countries.”
The country’s GDP growth declined from
1.5 percent in 2014 to 1.3 percent in 2015,
according to the African Development Bank
and “is expected to weaken further to 0.7
percent in 2016” on the back of “electricity
shortages, low commodity prices and low
consumer and business confidence continue
to restrain the growth of economic activity.”
Ishino added that investment in sales
promotion and other factors “put pres-
sure on profits, and substantial currency
conversion effects contributed to weak
business results.” The company’s sales in
Africa were $287 million, a 26 percent
drop from 2014 sales.

SAPMA chairman Terry Ashmore said earlier described 2015 as the difficult year for South Africa’s paints and coatings industry because of local and international trends.

“Just as we start looking forward to increased economic growth, we get knocked backwards by more events that move South Africa down the foreign investment ladder,” he told SAPMA members during their 2015 annual general meeting.

He said the capacity challenges faced
by South Africa’s electricity generation
and distribution monopoly Eskom, recent
xenophobic attacks added to the “to the
continuing problems of unemployment,
skills shortages, undisciplined union ac-
tion and the ever increasing pressure on
our global competitiveness.”
The Association’s vice chairman
Sanjeev Bhatt said what South Africa’s
manufacturing sector needs is “to take
positive steps to combat declining investor
confidence so that our economic activity
and export performance are not affected.”

For South Africa’s paints and coatings industry, Bhatt aptly summed up its next cause of action when he said: “Businesses will have to adapt, change and implement new strategies at every point and the coatings industry will need out-of-the-box thinking coupled with focus on individual core businesses to yield positive results.”CW