RENEWABLE ENERGY SECTOR: Staged consignment: To whose benefit?

Dear employer

The South African Revenue Service (SARS) policy in respect of staged consignments has recently been the subject of some controversy.

A staged consignment effectively allows importers to import products that would normally attract import duties, duty-free.

Practically, the system operates in that importers, who are required to import specific equipment or machinery required for a plant or factory (as the particular equipment or machinery is not manufactured in South Africa), can apply to have all components and material needed to set up the entire plant or factory imported as part of a staged consignment, duty-free.

This is despite the fact that most of the material can be manufactured and supplied locally and would have attracted an import duty under various tariff codes, had it been imported separately.

Although an argument can be made that this policy benefits South Africa as it makes it more affordable for foreign companies to invest in the country, this is countervailed by the fact that many local manufacturers and employees are consequently completely excluded from these projects.

Of particular concern is that the tender requirements for upcoming projects in the renewable energy space now barely contain a developmental- or local content element, which now only makes up 10% of the total score, effectively negating the need for importers to partner with local manufacturers or to utilise local labour under staged consignment provisions. This is massively detrimental to the local economy.   

Although there might be something to say about how staged consignment possibly makes South Africa a more attractive investment destination, this policy seemingly does not contribute anything to the fiscus, economic growth, or employment in a country that is in desperate need of all of these.

It seems strange for SARS to implement a policy that significantly reduces the income and, consequently, the tax contributions of local manufacturers without an apparent upside.

We recognise the fact that this is a complex issue with opposing interests, however, the negative consequences of the policy apparently outweigh the benefits and should be reconsidered.  

For more information

NEASA Media Department

media@neasa.co.za

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