The decline of Denel would compromise South Africa’s strategic independence, says chief restructuring officer (CRO) Riaz Saloojee, making the ... timely disbursal of the R3.4bn ($196m) lifeline thrown to the entity critical.
Bridgestone, Sumitomo, Goodyear and Continental are the four members of the South Africa Tyre Manufacturers Conference (SATMC). The group has applied to the International Trade Administration Commission (ITAC) to impose additional duties of between 8% and 69% on passenger, taxi, bus and truck vehicle tyres imported from China.
Tyres are the third-biggest cost driver in South African transport, after wages and fuel. The cost of taxi tyres would increase by 41% if the application succeeds. The cost of small passenger vehicle tyres would rise by 38%-40% and truck and bus tyres by an average of 17%.
That would be a “monumental” blow for users of public and private transport, as well as for businesses moving goods, Charl de Villiers, chairman of the Tyre Importers Association of South Africa, told a briefing this week. The result of the higher tariffs would simply be to shift the source of tyre imports from China to more expensive markets in Europe, de Villiers said. In a context of rising fuel prices, the duties could be “the last straw” for some small businesses. Some vehicle owners may use more second-hand tyres or delay buying needed replacements if costs rise, de Villiers said. “It’s a risk we can’t afford to take on our roads.”
- The companies involved have not publicly explained why they made the application. Donald MacKay, CEO of XA International Trade Advisors, told the briefing that it’s “bizarre” that Goodyear China has opposed Goodyear South Africa’s backing for the tariffs.
- Requests by The Africa Report to the SATMC to explain the reasons for the application were unanswered.
- Responses to the application are now being considered by the IATC, which has not said when an interim decision will be reached.
Taxi, freight impact
Taxi drivers would be the worst hit if the application succeeds, says Theo Malele, a spokesman for the National Taxi Alliance. Drivers have been hoping for government help to mitigate a crisis in the cost of living, with taxi fares needing to rise by up to 30% due to petrol price increases, he says. “This industry has not been supported by government. Our rand is already stretched to its limits.” Drivers will be forced to use after-market tyres, posing safety risks, Malele says.
There is a “lack of information” as to the reasons for the request and insufficient manufacturing capacity in South Africa to meet domestic tyre demand, says Gavin Kelly, CEO of the Road Freight Association. Many trucks have already stopped carrying spares due to the frequency of theft, he says. Kelly fears the tariffs would have an inflationary impact in South Africa, where 80% of goods are transported by road.
- An intended shift from road to rail transport in South Africa has stalled over the past 18 months due to vandalism and the lack of operational rail capacity, Kelly argues. “Transporters cannot absorb the cost” of the tariffs being sought.
The onus is on the SATMC group of companies to explain the rationale for their application.
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