FREIGHT & TRADING WEEKLY

For import / export decision-makers FRIDAY 10 May 2019 NO. 2343

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Special feature –Bulk Cargo

page 5

Sars clamps down on illicit tobacco trade

page 3

Liesl Venter

The corporatisation of Transnet National Ports Authority (TNPA) and claims that it is running the country’s ports unlawfully because it is a division rather than a subsidiary of the parastatal, have come under the spotlight after a court ruling that a report by the Ports Regulator of South Africa on the matter be made public.

In the report, the Regulator highlighted Section 3 (2) of the National

Ports Act of 2005 that states TNPA cannot be a division of Transnet.

The Act explicitly requires the TNPA to be converted into a private company subsidiary.

Other sections of the Act allow the Minister of Public Enterprises, Pravin Gordhan, the right to convert it into an independent and public entity separate from Transnet.

While the ruling came into effect in 2006, no moves have been made

to date to make TNPA a subsidiary of Transnet rather than a division.

Yet it continues to function as a corporatised entity.

This has raised questions around the legality of TNPA running the country’s eight commercial ports with some stakeholders saying that every contract signed since 2006 is now open to challenge.

The report, which highlights some of the concerns around TNPA not being a separate entity

and the impact on the port system and trade in general, was drawn up in 2016 for the then Minister of Transport.

Since then it has remained confidential, however it was recently brought to the fore in a court case brought by Siyakhuphuka Investment Holdings in the KZN Natal High Court.

Siyakhuphuka, the TNPA and the Regulator have all been at loggerheads over developments at the Port of Richards Bay since 2008.

Siyakhuphuka says it

proposed additions to the port that were rejected only to be implemented by TNPA the following year.

Siyakhuphuka also asked for access to the report, but this was denied because it was confidential. The matter then went to court where the court found in their favour and the Regulator has had to give them the report.

In the meantime a court case is ongoing over infrastructural upgrades at the Port of Richards Bay.

The Border Management Authority (BMA), which in due course will be responsible for all 72 ports of entry into South Africa, was in the spotlight at a recent presentation by the Department of Home Affairs (dha) at the Johannesburg Chamber of Commerce and

Industry. The keynote speaker was acting director general of the dha, Thulani Mavuso, seen here flanked by Gavin Colazo of immigration consultancy firm, Fragomen, and Elroy Africa, project manager of the BMA. See FTW’s reports about public-private issues regarding the BMA on page 8.

Conflicting views set the scene for BMA

New report raises questions about legitimacy of TNPA contracts

To page 7

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of South Africatransparency you can see

Scrap Metal Directive Extension – Comment dueIn the Government Gazette of 02 May the Economic Development Department (EDD) announced the “Extension of the Policy Directive on the Exportation of Ferrous and Non-Ferrous Waste and Scrap Metal” on which comment is due by 16 May.

By way of a reminder, in the Budget Speech of 20 February, the Minister of Finance stated that the National Treasury would work with the Department of Trade and Industry and EDD to explore the introduction of an export tax on scrap metal.

Carbon Tax Levy – Comment dueOn 30 April the South African Revenue Service (Sars) published draft amendments to the Rules to the Customs and Excise Act, 1964, in respect of the Environmental Levy for carbon tax imposed in terms

of the Carbon Tax Act, 2019, on which comment is due by 20 May.

The draft amendments relate to: (i) Part 1 of Schedule No 1 to the Act, 1964 ‘Ordinary Customs Duty’, in order to insert the provision of carbon emissions tax; (ii) Part 3F of Schedule No 1 to the Act, 1964’ Environmental Levy’, to provide for the environmental levy on carbon emissions; and Part 6 of Schedule No 6 to the Act, 1964, ‘Refunds and Rebates of Excise Duties, Fuel Levy and Environmental Levy – to provide for rebates and refunds on carbon tax.’

Carbon Tax Levy Forms – Comment dueSars on 30 April announced the introduction of environmental levy forms in respect of carbon tax imposed in terms of the Carbon Tax Act, 2019: (i) DA185 – ‘Application form – Registration/licensing of customs and excise clients’;

(ii) DA185.4A17 – ‘Client Type 4A17 – Operator of an emissions generation facility below the carbon tax threshold’; and (iii) DA185.4B2 – ‘Licensing Client Type 4B2 – Manufacturing Warehouse’ on which comment is due by 20 May.

The draft rules have been inserted for the implementation of the carbon tax to provide details on the envisaged carbon tax administration, including the registration of clients, licensing of emissions facilities, carbon tax environmental levy accounting and application of allowances as rebates, all of which need to be synchronised with the essential systems development.

According to Sars, Form DA180 – ‘Environmental Levy Return for Carbon Tax’ – will be added at a later stage, and this account only needs to be submitted in July 2020.

Duty Calls’ WatchlistThe Customs and Excise Bill, 2019 is due to come into operation on 01 June.

Comment on Sars’ “Discussion Document on the Rewrite of the Excise Legislation” is due by 31 May.

Comment on the anti-dumping investigation of disodium carbonate (soda ash) from the United States of America is due by 27 May.

Comment on the proposed increase in the rate of duty on polyethylene terephthalate is due by 24 May.

Comment on a note to the “Specific Drawbacks and Refunds of Customs Duties, Fuel Levy and Environmental Levy” is due by 10 May.

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FRIDAY May 10 2019 | 3

Adele Mackenzie

The South African Revenue Service (Sars) has taken decisive action to clamp down on the illicit tobacco trade which costs the country R8bn in lost revenue annually.

A tender has gone out for the provision of a production management and a track and trace solution for cigarettes produced in the country which will enable the organisation to monitor the journey from cigarette manufacturing plants to points of sale and import or export trades.

“This non-intrusive technological innovation

is expected to boost the monitoring and control of duties and taxes in this industry significantly,” said spokesman for the revenue authority, Sandile Memela.

The recently established Illicit Economy Unit at Sars

had “hit the ground running” with a number of “impactful enforcement activities” already in the public domain, said Memela.

The illicit economy ranged from an underground economy, which operated outside the rules and regulations

of the country, to organised crime, and included the illicit

trade of products, he added. “Sars has embarked on a

process to mitigate such illicit and non-compliant activities by means of improved policy, enhanced processes and the use of advanced technology to uniquely marked products in order to strengthen the enforcement environment and ensure overall control of the supply chain,” Memela pointed out.

Hence the tender for the track-and-trace marker technology in the cigarette industry.

Francois van der Merwe, chairman of the Tobacco Institute of Southern Africa (Tisa) said that around 55% of the current revenue shortfall of around R8 billion could be filled through “strong intervention” in tackling the illegal cigarette market.

“The illicit tobacco trade is one area where the new Sars commissioner, Edward Kieswetter, could make

an almost immediate and significant difference to our country at this critical time.”

He said that Sars had already made headway in tackling the illicit operators involved in the illegal cigarette trade.

“We urge Mr Kieswetter to continue this fight to its conclusion,” said Van der Merwe.

Around 350 local tobacco

farms are directly threatened by the illicit tobacco trade –

of which about 50% are black-owned small-holder farms, according to Pietman Roos, Agri SA head of corporate affairs and communication.

He said these producers were fully dependent on the legal tobacco industry in South Africa to purchase their produce.

This non-intrusive technological innovation is expected to boost the monitoring and control of duties and taxes in this industry significantly.– Sandile Memela

“ Hopes are pinned on new Sars boss Edward Kieswetter to stub out illegal cigarette sales.

Sars to deploy technology to clamp down on illicit tobacco trade

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In line with its growing focus on the reefer market in South Africa, Gold Star Line (GSL) has just brought in more than 100 x 40ft high-cube reefers to be deployed on its fully cellular SA1 service connecting China, South East Asia and South Africa.

Branded ZIMonitor, these state-of-the-art smart containers are equipped with new ground-breaking technology which puts all information about the cargo and container at the customer’s fingertips, according to global reefer manager Michael Shvarzman.

ZIMonitor gives the clients the tools needed to track, monitor and even control the cargo’s environment from start to finish.

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“ZIMonitor containers are specifically designed and highly suitable for the all-important cold treatment processes required by South African fruit exporters to certain Asian markets.”

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GSL brings on ‘smart’ reefer containers

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South Africa will see a record crop of citrus exports this year with close to 137 million boxes of citrus fruit expected to move to more than 100 countries.

This comes after a record crop last year that yielded a revenue of nearly R19 billion.

According to John Edmonds, information manager for the

Citrus Growers’ Association of Southern Africa (CGA), the main driver of this growth is in the soft citrus and lemon categories.

“However, the net growth in these categories is somewhat muted due to a 3%

decline in Valencia oranges,” said Edmonds.

Valencia oranges make up the biggest portion of the citrus export market at 39%, followed by navel oranges at 20%, lemons 16%, soft citrus 13% and grapefruit 12%.

The South African citrus industry has continued to show resilience over the past few years in the face of ongoing pressure from some of the country’s biggest export markets around increasingly harsh phytosanitary requirements. Citrus Black Spot (CBS) in particular has forced growers to implement costly mitigation measures to meet

the stringent requirements of the European Union.

According to the CGA, these CBS mitigation measures cost the citrus industry around R1.86 billion per year.

Despite these challenges, citrus growers have continued to rally, delivering two record crops for the export market in succession in 2017 and 2018 with a third expected this year. Last year South Africa also became the world’s biggest grapefruit exporter.

Edmonds said South Africa was expected to export less grapefruit this year – an estimated 15.1 million cartons, 9% down on last

year’s 16.5 million. “For Valencia oranges, our

expected exports from the Southern African regions are 52.9 million cartons which is 3% down on last year’s 54.4 million cartons,” he said. “Our navel export volume is expected to be the same as last year at 26.9 million cartons. That is 3% more than our 2015 exports.”

It is, however, in lemons where the region’s good news lies. Lemon exports are expected to grow by two million cartons this year with the total volume now approaching the 22 million carton mark as new orchards come into production.

– Liesl Venter

Liesl Venter

Increasing bunkering off the Eastern Cape coastline remains a priority for the country as a third company has been granted an offshore licence.

This is very good news, the Cape’s Port Liaison Forum (PLF) says in support of its argument that bunkering offers viable opportunities for the country.

It also comes as Colt Marine prepares to come on board off the Algoa Bay coast after being issued an offshore bunkering

licence earlier this year.

Aegean Marine Petroleum Network and South African Marine Fuels also hold offshore bunkering licences.

It is estimated that at least 40 vessels are serviced off Algoa Bay every month.

“There are huge opportunities around bunkering and it is good to see the focus directed toward this with efforts being made to increase bunkering off our coast,” said PLF chairman Mike Walwyn.

Bunkering has been under pressure in South Africa due to increasing costs resulting in vessels opting to bunker elsewhere.

From a global perspective, bunkering has also seen much uncertainty due to the International Maritime Organisation’s decision to implement a 0,5% sulphur cap on marine fuel from 2020.

All three of the offshore operators off Algoa Bay have indicated they will have low sulphur fuel available come January 1 – the deadline for complying with the cap.

The PLF also welcomed the decision by the International Bunker Industry Association

to host its regional African conference in Cape Town later

this month.This would highlight

the bunker industry and the role it could play in

the economy, the PLF said.There are huge

opportunities around bunkering.– Mike Walwyn“

Bunker news bodes well for SA

South Africa produces record citrus crop

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6 | FRIDAY May 10 2019

International concern over Zambia is rising as the country’s debt levels continue to spiral out of control – but the country itself seems to have opted for a blasé approach.

China remains the largest creditor to Africa’s second-biggest copper producer and analysts have warned that unless the country addresses its debt it faces a real risk of losing assets to the Asian giant.

Last week Zambian finance minister Margaret Mwanakatwe, however, told Bloomberg in Washington she was not worried about Zambia’s declining foreign reserves, which had fallen to the lowest level in more than ten years.

Calling the country’s increasing debt an “investment for the future”, she said the debt was for infrastructure development.

It’s not a sentiment shared by the International Monetary Fund (IMF)

and ratings agencies.The IMF has issued

several warnings to the country that its debt burden is excessive. This has been reiterated by all the ratings companies.

According to Celeste Fauconnier, an African investment specialist

and senior economist at Rand Merchant Bank, concerns over Zambia and its approach to its debt were rising.

“We are very worried about Zambia and the approach taken,” said

Fauconnier.“Its debt levels are

incredibly high and have to be addressed. It is the biggest challenge facing African countries. Most of these governments, however, know they have to do something about it. They are aware of the risks and understand the importance of bringing that debt down.”

But Zambia, said Fauconnier, was doing the exact opposite.

Not only is it

unconcerned about debt, but, according to Mwanakatwe, the decline in reserves to less than two months’ import cover was nothing to worry about.

Recently Mwanakatwe publicly declared that the Zambian government had mitigating interventions that would improve falling reserves. She has yet to disclose what these actions entail.

According to the IMF, Zambia’s external debt has increased to $10.05 billion. This is significantly higher than the $8.74 billion of a year ago.

“The country has also not managed to come to an agreement with the IMF on a package to assist with the debt,” said Fauconnier.

“Its largest creditor is China which seems happy

to just restructure the debt. If Zambia continues on this path it is going to lose state-owned assets to the Chinese.”

This was causing much uncertainty in the market and money was f lowing out of the Zambian bond market at an increasing rate into more stable African economies.

“At the moment Zambia might not be worried as the copper price is stable and they are getting paid in dollars,” said Fauconnier, “but if that price drops at all it is going to have a huge crisis on its hands.”

Several large corporations are believed to have already pulled out of the country with more weighing up the options at present.– Liesl Venter

In staying abreast of a fast-changing world, Transnet is looking at disruptive technologies and innovations, including companies like ride-hailer Uber and medical aid service provider, Discovery, to find inspiration.

Addressing a recent Transport Forum in Durban, Saleem Peterson, head of strategy at Transnet Port Terminals, said insight could be garnered through studying these disruptors.

One way of tapping into data-savvy innovations, he added, would be to establish a common logistics platform on which information could be shared across the whole industry.

It is hoped that through such collaborative information sharing, especially with companies that have an edge in the industry, the movement of goods in South Africa could become more competitive and effective.

Speaking at the same forum, general manager Brenda Magqwaka in the office of TPT’s group executive, also invited logistics companies to assist Transnet with developing new products and services.– Ed Richardson

The best way to leverage free trade agreements (FTA) was through technology and specifically automation. – Reinhard Pölzl

“

Zambia on verge of forfeiting sovereign assets

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According to Ports Regulator Mahesh Fakir, there have been no attempts to keep the issue of corporatisation of the ports authority secret and it has been a topic of conversation for several years – addressed in Parliament and on various platforms.

“Our position was never to keep this issue a secret, but the report was confidential, and for the attention of the minister,” he told FTW.

He confirmed that they had since made it public in accordance with the court order.

“I don’t think it is in anyone’s best interests to undo or destroy what we have built up in our port system, but rather facilitate and make things work better,” he said when asked about the claims that TNPA was running the country’s ports unlawfully.

“Also, one must not forget that TNPA cannot corporatise itself. It cannot incorporate itself as a Pty (Ltd). That has to come from the Minister of Public Enterprises as the sole

shareholder of Transnet and all its divisions.”

And, said Fakir, this was a matter currently under consideration by Gordhan.

In a letter to the Ports Regulator dated November 29 last year, acting director-general Thuto Shomang said the Minister was considering implementing Section 3 (2) of the National Ports Act. “The decision will be informed by an assessment of the impact of the implementation of the Act,” reads the letter.

Mike Walwyn from the South African Association of Freight Forwarders (Saaff) said the issue had been a concern ever since the promulgation of the Act which specifically stated that TNPA must be corporatised.

“Over the years, the question has been raised in various forums, but

no concrete plans were ever disclosed, and the impression has been that this is a very problematic issue for Transnet.

“We believe it is something that should happen sooner rather than later. Quite apart from the questionable validity of every contract signed in the last 13 years, there is the question of

transparency.“The current

divisionalised structure doesn’t allow for interrogation of the extent to which TNPA may or may not be subsidising other Transnet operations. And the regulatory mechanism provides that TNPA must exercise oversight over port terminals in terms of their efficiencies and pricing, but in practice this cannot be easy when TNPA and TPT are both divisions of the same company.”

Moshe Motlohi, general manager of corporate affairs and external relations at TNPA, said they were aware of the report and acquainted with its contents.

“Importantly, we wish to state at the outset that there is quite simply nothing unlawful in the manner TNPA conducts its business. It operates squarely within the confines of the law, as much as its relationship and/or dealings with Transnet are strictly in accordance with the applicable legal and corporate governance framework that addresses itself to the peculiar regulatory position pertaining to TNPA,” he said.

According to Motlohi, the report merely expresses the opinion of its authors. “It does not and cannot constitute legal findings that are binding on any external party, including TNPA or Transnet. TNPA is satisfied that it has structured its relationship and governance arrangements with Transnet in a manner consistent with the regulatory framework contemplated in the law.”

There is quite simply nothing unlawful in the manner TNPA conducts its business. – Moshe Motlohi

“

Ed Richardson

Transnet can only realise its ambition of being a low-cost port and logistics company that creates an environment in which South African exporters can be competitive globally if it brings in the private sector as partners.

Speaking at a recent Transport Forum in Durban, Transnet group executive for new business growth and diversification, Herbert

Msagala, said this would include the concessioning of certain in-port operations to the private sector.

“Transnet should not be the only terminal operator,” he said.

Brenda Magqwaka, general manager in the office of the chief executive of Transnet Port Terminals (TPT), stressed the importance of collaboration between the private sector and the state utility.

She said Transnet wanted to move away from being an “asset heavy” company to a lean logistics service provider.

“For us to be able to provide an integrated logistics service we have to integrate with industry to provide speed and efficiency.”

A first step is the signing of a R100 million partnership agreement between Transnet and agribusiness Afgri to upgrade grain-handling

facilities at the ports of Durban and East London.

Afgri and TPT will share the planning and scheduling of landside and quayside operations, health and safety, as well as legal matters, while facilities management, human resources and public interaction, among other services, will be handled by Afgri.

Transnet, however, will retain ownership of the upgraded facilities.

LAST WEEK’S TOP STORIES

Transnet needs private partners to reduce costs

Petrol price hike in MayConsumers will have to dig even deeper into their pockets as both grades of petrol are set to increase by 54 cents a litre this week.

AU prepares for single market launch in JulyThe African Continental Free Trade Area would enter into force during the next African Union Summit slated for Niamey, Niger, in July, the East African reported on Tuesday.

New factory breathes life into KZN textiles industryKwaZulu Natal’s efforts to boost its once f lourishing textiles industry has been given a shot in the arm with the official opening today (Monday) of the UMsinga clothing factory in Msinga.

Shipping major launches online customs clearance platformMaersk Line today announced the launch of a customs clearance online shipping management platform in seven European countries – and plans to expand the offering across the world by the end of 2019.

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From page 1

New report raises questions

8 | FRIDAY May 10 2019

$ Pe

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Eugene Goddard

The roll-out of South Africa’s Border Management Authority (BMA) – which will oversee the country’s borders and ports of entry, including customs and policing – appears to be making a slow start.

A pilot phase for the launch of what will be a “centralised

command and

control” centre is yet to be announced, but acting director general for the Department of Home Affairs, Thulani Mavuso, told delegates at a Johannesburg Chamber of Commerce and Industry (JCCI) business breakfast last week that “safeguarding the territory of our country” was a critical priority.

Demonstrating the enormity of the challenge, Mavuso said that 40 million travellers

passed through SA’s borders annually – and the 369 726 illegal tourists deported between 2011 and 2016 were most likely a drop in the ocean considering the World Bank’s estimation that the country had become a home to some 10 million refugee claimers.

Mavuso said that for the most part, 90% of these so-called refugees were just opportunity seekers – “economic migrants whose claim of refugee status is rejected”.

As for unauthorised

items imported into the country, the National Regulator of Compulsory Specifications has recorded R1 billion in illicit goods coming into SA over the last five years.

Contraband clothing on its own has reached staggering proportions, with the SA Revenue Service (Sars) and the SA Police Service (Saps) seizing seven million items of clothing between 2011/12.

Eugene Goddard

The South African Association of Freight Forwarders (Saaff) has made its strongest expression yet regarding the much-delayed and long-awaited consolidation of all border control entities into one unified behemoth – the Border Management Authority (BMA).

Last week, during a question and answer session at the Johannesburg Chamber of Commerce and Industry where the Department of Home Affairs (dha) gave a BMA presentation, Saaff representative Johan Marais didn’t mince his words.

For starters, he questioned BMA project manager Elroy Africa’s contention that the authority had been conceived and crafted in consultation with the private sector.

“In my experience this is the first time since 2013 (when

the BMA was decided on) that we have been given an overall presentation.”

More alarmingly, Marais added that “BMA discussion with the private sector is

chronically lacking”.

In fairness, he complimented the dha for an “enlightening and comprehensive presentation” but, cutting to the quick, stressed that Saaff and its members had serious

reservations about the implementation of the BMA.

This is despite Africa’s explanation that the BMA will be instituted over several phases, culminating in a final implementation date of sometime in 2032.

Mostly it was the complexity of the task at hand that worried freight forwarders, Marais said.

“The concept of a coordinated border management authority is supported by us 100% but it’s a mammoth task.”

Saaff, he said, was particularly concerned about the disruptive effect that a change-over in personnel and skills could have on freight and trade.

“Taking all the relevant acts into consideration, for these to now be selectively enforced by the BMA you are obviously going to look at staffing.

“It means you will have to negotiate with public servants about transferring people out of their principal departments into the BMA.”

Considering South Africa’s persistent issues with labour disputes and resulting strikes, it was important that this change-over happened with little if any effect – hopefully – on customs, import and export control, immigration, policing and the various services required by border managements, he said, adding that it was important for the dha to grasp how crucial the movement of freight was for international trade.

“We simply cannot afford to have goods coming into South Africa delayed because of a lack of integrated systems.

Saaff representative Johan Marais. Acting Home Affairs DG, Thulani Mavuso.

Conflicting views set the scene for BMA

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The concept of a coordinated border management authority is supported by us 100% but it’s a mammoth task

“ A pilot phase for the launch of what will be a “centralised command and control” centre is yet to be announced.

“– Thulani Mavuso

– Johan Marais