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Annual Report (2011/2012) Presentation to the Portfolio

Committee on Economic Development

23 October 2012Siyabulela Tsengiwe

Chief Commissioner

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Contents

1. Introduction.

2. Key Strategic Objectives & Performance Areas &

Services.

3. Tariff Investigations.

4. Anti-Dumping Investigations.

5. Import and Export Control.

6. Corporate Governance.

7. Auditor General’s Report.

8. Financial Performance.

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Introduction

• The global financial crisis and its adverse impact on the domestic economy presented new challenges with respect to the environment in which ITAC operates.

• The developmental approach to tariff setting is aimed at promoting domestic manufacturing; employment creation and international competitiveness.

• In the vast majority of our investigations we have met the new turnaround times without compromising on quality.

• One of the central aims of the NGP is to build a lower carbon-emission economy and, in making a contribution to this objective, ITAC has embarked on an analysis of the tariff regime for green goods with a view to identifying opportunities and threats.

• Conditionalities to tariff support.

• Acting swiftly against unfair trade.

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Key Strategic Objectives, Performance Areas & Services

Ensure contribution to employment creating growth and development through

effective delivery of international trade instruments

International Trade Instruments

What will be pivotal in improving the provision of customs tariffs, trade remedies, and import and export control will be the quality

and turnaround times.

Customs Tariff Investigations[Increasing Duties, Reducing Duties, &

Creation of Rebates]

Trade Remedies Investigations[Antidumping, Countervailing & Safequards]

Import & Export Control[Permits & Enforcement]

Ensure organisational efficiency and effectiveness of ITAC

Business Support Services

oHuman ResourcesoFinance oInformation TechnologyoLegal ServicesoPolicy and Research

Ensure strategic alignment and continued relevance with the

Department of Economic Development and national

agenda

International Trade Technical Advice

ITAC will become more proactive in the provision of technical inputs

and contributions to trade and industrial policy implementation, as

well as trade negotiations at bilateral, regional and multilateral

levels.

Technical Inputs on Trade and Industrial Policy , including Sector

Strategies

Technical Inputs on Trade Negotiations

[WTO, SADC & SACU] ;

Bilateral Agreements [EU, EFTA, MERCOSUR, & INDIA]

The performance of the institution will be driven through appropriate business

solutions, efficient and effective utilisation of material, human and information technology resources.

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Tariff Investigations Completed During 2011\2012

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Southern Sewing Thread Synthetic filament yarn Free – 15% Increase

Safripol Polypropylene Declined Increase

Safripol High density polyethylene Declined Increase

Franke Kitchen Systems Stainless steel sinks 20% - 30% Increase

Metering Systems Water meters Free – 10% Increase

Mondi Packaging SA Paper & paperboard 48.10 Declined Increase

Mondi SA Uncoated paper 4802.56.10 Declined Increase

Aluminium Extruders Association Aluminium rolled products Declined Increase

Belgotex Floor Coverings Artificial grass Free – 10% Increase

Bull’s Eye Paintballs Paintballs Declined Increase

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Cordustex Non-woven spun-bond fabric for diapers

Approved Rebate

National Cap Factory Polyester fabric for caps Declined Rebate

TEXFED Yarns for textiles Approved Rebate

Futuris Feltex Textured yarns for car carpets Declined Rebate

ITAC Worn overcoats Approved quota Rebate

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Tariff Investigations Continued

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Li Feng Textiles Yarn for denim fabric Declined Rebate

SA Fruit & Vegetable Canners Association Canned pineapples Approved withdrawal of rebate Rebate

Uniresins Dehydrated castor oil Approved Rebate

ITAC Reviewed rebate item 405.04 for donations

Approved Rebate

ITAC Reviewed drawback item 521.00 Approved Rebate

ITAC Rebate item 470.03 to extend export period for yachts industry

Approved Rebate

Belgotex Floor Coverings Yarns & backing material for artificial grass

Approved Rebate

ITAC Components for the manufacture of yachts

Approved Rebate

ITAC Computer monitors Approved Rebate

Bombela Consortium Inputs for maintenance of Gautrain Declined Rebate

Transnet Various products for pipelines Declined Rebate

Auto Truck & Tyres Solid or cushion tyres Declined Rebate

Auto Truck & Tyres Radial tyres Declined Rebate

Benteler Catalytic converter assembly Approved Rebate

thedti Minibuses & Midibuses Approved Rebate

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Tariff Investigations Continued

APPLICANT PRODUCT APPROVED AMENDMENT TYPE OF AMENDMENT

Guth SA Polyethylene bags Approved Reduction

ACS Recycling Composite (PVC based) Declined Reduction

ITAC Lysine Approved Reduction

AXIM X-rays Declined Reduction

Sugar Direct Sugar Declined Reduction

Masterparts Inlet & exhaust valves Declined Reduction

Masterparts Pistons for diesel engines Approved Reduction

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Administration of MIDP

The MIDP is a rebate scheme based on customs duties that are phased down over time that can be rebated using Import Rebate Credit Certificates (IRCCs) which are issued based on economic performance of qualifying motor vehicles and components thereof. Furthermore, Productive Asset Allowance (PAA) certificates are issued based on investments in qualifying productive assets.

thedti is the policy making authority for the MIDP & ITAC administers the program.

The MIDP will be replaced by a new programme, the Automotive Production Development Programme (APDP) in 2013.

Certificates issued under the MIDP:Import Rebate Credit Certificates (IRCCs) - 2231Heavy Commercial Vehicle (HCVs) - 70Eligible Export Certificate (EECs) - 50Productive Asset Allowance Certificate(PAAs) - 43

MOTOR INDUSTRY DEVELOPMENT PROGRAM (MIDP)

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Anti-Dumping Investigations

Product Country Applicant Type Status and Duties

Frozen chicken and parts Brazil Southern African Poultry

Association

Anti-dumping In progress

Frit Brazil Ferro Industrial Products (Pty) Ltd Anti dumping In progress

Threaded rods PRC South African Fasteners

Manufactures’ Association

Anti-dumping In progress – Final stage

Threaded screws PRC South African Fasteners

Manufactures’ Association

Anti-dumping In progress – Commission made final

determination

ORIGINAL INVESTIGATIONS

Product Country Applicant Type Status and Duties

Frozen chicken parts USA Southern African Poultry

Association

Sunset Review Finalised, 940c/kg

Unframed mirrors Indonesia PFG Sunset Review Finalised, 6.61%

Clear float glass PRC and USA Fine Chemicals Association Sunset Review Finalised, 30.50% - 45%

Bolts and NutsPRC South African Fasteners

Manufactures’ Association

Sunset Review Finalised, 55.40 % (Bolts), and

122.17% (Nuts)Electric cables

India AECMSA Sunset Review Finalised, 65.47%

REVIEWS

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Import and Export Control

During 2011/2012 import permits issued amounted to 16 224. The target was 13 000.Majority of the permits were for the following imported products:

Marine ResourcesMineral fuels and oilsChemicalsRubber and tyresMetals Mechanical AppliancesAutomotives

 

IMPORT PERMITS ISSUED

EXPORT PERMITS ISSUED

Chapter Description Permits Issued Chapter Description Permits Issued

26 Ore, slag and ash 7 75 Nickel waste and scrap 12

27 Mineral fuels 397 76 Aluminium waste and scrap 578

28 Inorganic chemicals 780 78 Lead waste and scrap 138

29 Hydrocarbons 920 79 Zinc waste and scrap 62

30 Human blood 3 80 Tin waste and scrap 8

47 Paper waste 79 81 Other base metal waste and scrap 114

72 Ferrous waste and scrap 846 87 Used motor vehicles 2104

74 Copper waste and scrap 791

Export permits issued in 2011/2012 amounted to 6839. The target was 7000.

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Corporate Governance

• ITAC adheres to all applicable regulations governing the operations of public entities. The policies are developed to ensure effectiveness of corporate governance strategies in terms of applicable legislations or guidelines which are: PFMA; Treasury Regulations; PPPFA & relevant SCM regulations; King III Report; etc.

• ITAC maintains effective internal controls which are designed to ensure that risks are reduced or managed and that the organisation is able to meet its objectives. ITAC’s internal control measures include amongst others the risk management activities, internal audit activities, the relevant committees (Risk and Audit) and other internal governance structures.

• The internal controls are continuously monitored throughout the year by Management, Internal Audit and by other relevant Committees. All identified gaps are referred for correction to relevant officials.

COMPLIANCE & INTERNAL CONTROLS

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Corporate Governance Continued

• ITAC has an effective risk management function and conducts its risk assessment continuously and then present the risk register to the Risk Management Committee. The committee then refers those risks whose status has changed to the Internal Audit Unit to perform independent test of whether the Risk Register represent the true situation of the organisational risk.

• ITAC Executive Committee monitored the internal controls and relevant risk management processes for 2011/2012 year-end and is satisfied with their effectiveness.

• The Risk Management Committee played the role of reviewing the organisational risk and makes recommendations for improvement on risk management activities to be implemented by management.

RISK MANAGEMENT

• The Audit Committee held 4 meetings in the year under review.

• According to the Audit Committee report:

The system of internal control applied by ITAC over financial risk and risk management is effective, efficient and transparent.

The Audit Committee is satisfied with the content and quality of monthly and quarterly reports prepared and issued by the Accounting Authority of ITAC during the year under review.

The Audit Committee is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to ITAC in its audit.

AUDIT COMMITTEE REPORT

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• Irregular Expenditure for ITAC in 2011/2012 amounts to R788 708.00, of which 73% was for not specifying the criteria (preference points) for evaluation of the

quotes. Though the criteria was not specified to the service providers when requesting the quotes, the 80/20 evaluation criteria was in fact applied before appointing the successful service provider,

25% relates to procuring services with less than three quotation, and 2% was for exceeding petty cash limit.

• Fruitless and wasteful expenditure in 2011/ 2012 amounts to R35 074.00 and relate to penalty for underpayment of pension as a result of underpayment due to system.

• Processes for condonation of the above expenditures have been followed and correspondence has been sent to National Treasury and AG’s Office as required by SCM regulation.

Auditor General Report

IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE

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• ITAC has developed an Audit Action Plan template with clear actions to be taken to

address the audit finding. • Some of the findings have already been addressed and progress is being reported on

outstanding findings still to be addressed.• Internal Audit Unit has been given responsibility to examine as part of its audit

process the Audit Action Plan to test whether the proposed or implemented actions will address the AG findings.

• The Executive Committee also plays the role of monitoring the implementation of the action plan through a report presented on Action Plan progress on implementation.

OPINION OF AUDITOR GENERAL

• ITAC has obtained an unqualified opinion in 2011/ 2012 financial year with findings on compliance with laws and regulations, and also findings on predetermined objectives.

• Compliance findings relate to the above mentioned irregular expenditure on the previous slide and predetermined objective findings relate to usefulness of performance information, in terms of consistency between planned and reported targets and clear data definition.

IMPLEMENTATION OF AUDIT RECOMMENDATIONS

Auditor General ReportContinued

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Financial Performance

• ITAC has a sound financial position as assets are more than its liabilities.

• ITAC’s total assets amount to R30.4 million and this figure consists of Cash and Bank-89%, Fixed Asset-7% and Account Receivables-4%.

• ITAC’s total liabilities amount to R10.1 million and this amount consists of Provisions and Commitments for both Non Current Liabilities-21% and Other Current Liabilities-39%; and Account Payables-40%.

• The difference between ITAC’s assets and liabilities, R20.3 million relates to the Net Asset. This amount is a cumulative figure included in the AFS in line with GRAP standard for basis of preparation of AFS. It includes various financial years in which approval was granted to ITAC by National Treasury to retain surpluses for ITAC’s projects meant for its operational effectiveness.

OPERATING RESULTS - ASSETS AND LIABILITIES

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Financial Performance Continued

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Financial Performance Continued

• ITAC’s total revenue amounts to R71.7 million and R69.6 million (97%) is EDD allocation, other part relates to interest received and other revenue.

• ITAC’s total expenditure amounts to R68.8 million and 75% of this expenditure relates to compensation of employees while 25% relates to Goods and Services, depreciation and impairment of long outstanding debtors as per Bargaining Chamber resolution.

• ITAC had a surplus of R2.9 million in 2011/2012 and 80% of this relates to saving on employees cost as a results of resignations during the year. Other saving relates to legal fees of which payment is depended on finalisation of litigation that ITAC is involved in.

• The surplus of 2010/2011 has been restated from R2.6 million to R1.4 million as the Depreciation Recovery of R1.2 million has been reversed.

OPERATING RESULTS - REVENUE AND EXPENSES

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Financial Performance Continued

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Thank You

Office Contact Details: 012 394 3713

Cell: 082 454 8979 stsengiwe@itac.org.za

www.itac.org.za