CUSTOMS AND EXCISE
by Tanya Goldman1
CUSTOMS AND EXCISE ........................................................................................................ 1
1 Introduction ........................................................................................................................ 2
2 How Customs and Excise works........................................................................................ 2
2.1 The structure of the service ............................................................................................ 2
2.2 Customs transformation ................................................................................................. 3
2.3 Expenditure .................................................................................................................... 3
2.4 Decision-making ............................................................................................................ 4
3 South Africa’s position in international trade .................................................................... 4
3.1 Globalisation .................................................................................................................. 4
3.2 Multilateral agreements.................................................................................................. 7
3.3 Imports and exports........................................................................................................ 8
4 Revenue collected by customs and excise........................................................................ 10
5 How tariffs affect women................................................................................................. 12
5.1 Women as workers ....................................................................................................... 13
5.2 Women as consumers................................................................................................... 14
5.3 Women as traders ......................................................................................................... 14
6 Non-tariff issues ............................................................................................................... 17
6.1 Non-tariff trade barriers ............................................................................................... 17
6.2 Customs fraud .............................................................................................................. 18
6.3 Dumping....................................................................................................................... 19
6.4 Rules of origin.............................................................................................................. 21
6.5 Intellectual property rights ........................................................................................... 22
6.6 Sin taxes ....................................................................................................................... 24
6.7 Information................................................................................................................... 25
7 Conclusions and recommendations.................................................................................. 25
8 Acronyms ......................................................................................................................... 27
9 References ........................................................................................................................ 28
Thanks to Debbie Budlender for her input and support every step of the way; to Imraan Valodia for comments
on an earlier draft; to the staff of customs and excise, BTT and DTI who took time to answer many queries; and
to Amanda Driver, Mark Bennet, Lee Dutton, Claire Horton and Di McIntyre for their assistance.
Customs and Excise is the section of the South African Revenue Service (SARS) responsible
for the collection of revenue at all points of entry into the country. Revenues collected at
points of entry include import tariffs, dumping duties and value-added tax (VAT) on imports.
Customs and Excise is also responsible for the collection of other duties on certain goods
produced locally or imported. These include ‘sin’ taxes, duties on luxury goods and the fuel
levy. The customs service keeps statistics on all imports and exports, confirms rules of origin,
and deals with illegally imported goods
Customs and Excise plays an important role in protecting the economy and implementing
policies set by Department of Trade and Industry (DTI). The impact on women of DTI’s
policy of trade liberalisation was examined in the first Women’s Budget chapter on work
(Valodia, 1996). The Fourth Women’s Budget chapter on job creation (Newton et al, 1999)
includes further analysis of the impact of trade policy in terms of expenditure. The chapter on
Finance, State Expenditure, SA Revenue Services and Central Statistical Service (Valodia,
1998:106-107) in the Third Women’s Budget briefly looks at the customs service as part of
SARS. It stresses the importance of improving efficiency of revenue collection to support
government’s expenditure plans.
This paper takes a more in-depth look at the revenue collecting function of customs and
excise, and how related issues impact on women and men. It assesses the impact of the
policies that govern Customs and Excise in general terms as well as the practical
implementation of these policies.
Section 2 describes how Customs and Excise operates.
Section 3 describes South Africa’s position in international trade.
Section 4 disaggregates Customs and Excuse revenue in South Africa.
Section 5 examines how tariffs affect women in different roles.
Section 6 looks at the impact of non-tariff customs and excise issues.
Section 7 provides some recommendations as to how customs and excise can be made
more friendly for women and poor people.
2 How Customs and Excise works
2.1 The structure of the service
Customs employs a total of 1 600 people. The staff increased by 20% between 1995 and 1999
(SARS, 1999), showing the importance attached to this function. The majority staff 52 border
posts, 24 ports, airports and railway stations, and excise offices in all major centres in the
Customs duties are imposed on imported goods and services. Certain points of entry have
been designated to receive particular goods. These goods cannot be brought into the country
at other points. Excise duties are imposed on locally produced goods and imports alike.
Excise taxes on local goods are collected from producers in the towns where the business’s
central office is located. There are both local and national inspectorates to ensure that
companies pay duties.
Customs works together with other government departments on some tasks. For example,
coordination for cracking down on customs fraud is achieved through the Customs Law
Enforcement Task Group (CLETG). CLETG is a collaborative arrangement between SARS,
the SA Police Service and the justice department. It is an important channel for reporting
trade fraud and facilitating action.
2.2 Customs transformation
The customs service was under-resourced by previous governments. On the one hand, high
tariffs were imposed to promote local production. And South Africa had one of the world’s
most complex trade regimes (Belli et al, 1993). On the other hand, the apartheid government
ignored sanctions-busting and the movement of goods and people over borders which were
part of military destablisation of other Southern African countries (SARS, 1999). And
insufficient attention was paid to the application of tariffs and enforcement of other trade-
related legislation such as anti-dumping measures and import or export control.
Problems with customs were discussed by government, business and labour in the National
Economic Forum’s (NEF) short-term working group which was established shortly before the
first democratic elections. The issue was put on the agenda because of the damage illegal
imports were doing to local industry. This debate continued in the Chamber of Trade and
Industry of NEDLAC, the NEF’s successor.
In 1998, SARS launched the Customs Transformation Programme (CTP). This was part of the
overall SARS programme to increase revenue by improving efficiency and stamping out
corruption and fraud. SARS (undated:9) describes the CTP as involving the following steps:
1998 • Short-term fixes
• Programme design
1999 • Roll out of techniques and best practices
• Business process review and design
2000 • Development of systems
2001 • Implementation
2002 • Projects roll-out
It is clear from the timetable that it will take some time for the transformation process to be
implemented and the results to show.
In 1997 SARS became an independent agency from the Department of Finance. Since that
time, it receives its main funding through a transfer from the Finance vote rather than being
part of the Finance vote proper. The 1999/00 SARS transfer was R1 872m and that for
2000/01 was R2 198m. The government budget documents do not show how much was
allocated specifically for Customs. However, there were special supplementary allocations of
R51 million in 1999/00 and R50 million in 2000/01 for the improvement of border posts,
customs administration and border policing.
At the same time, government budgeted for “efficiency gains” of R200 million from excise
duty and R100 million from customs duties (Business Day, 18 February1999). In 1998, SARS
estimated revenue losses due to outdated customs and excise systems to be around R9,5
billion a year (Business Day, 14 February 1998). British officials seconded to assist South
Africa in improving the efficiency of customs and excise have argued that any costs incurred
by government in improving the service are recovered ten fold through additional revenue
earned (Lee Dutton, 1999, personal communication). So, expenditure on customs and excise
is really a form of investment.
South African business has put resources into improving the customs and excise service,
particularly the training of customs staff to increase efficiency and avoid fraud. Between
August 1998 and September 1999, business representatives from at least ten sectors were
involved in the training of customs officials and border police around the country (Lee
Dutton, 1999, personal communication).
Training alone does not solve the problem. For example, Portnet’s new container X-ray
scanner, installed at a cost of R23 million in 1999, was reported to be integral to the success
of an anti-fraud campaign in Port Elizabeth (Business Day, 6 March 2000).
SARS lists improved cooperation with the private sector, organised industry, government
departments and other stakeholders as one of its achievements (SARS, 1999).
Business and labour have the opportunity to participate in decision-making around trade-
related issues in the NEDLAC Trade and Industry Chamber. In 1997, the Chamber
established a customs and excise sub-committee. The Chamber also has a Technical Sectoral
Liaison Committee (TESELICO), where government trade negotiators consult with business
and labour across industries. Outside of NEDLAC, ad hoc sectoral meetings are also held
with stakeholders in the process of negotiating a trade agreement.
The Congress of South African Trade Unions (COSATU) has lobbied for greater stakeholder
involvement in the negotiation of trade agreements, including participation in South Africa’s
negotiating delegations. The trade unions have also called stakeholder representation on
structures, such as the Joint Co-operation Commission between South Africa and the
European Union, set up as a result of trade agreements
Business meanwhile established the Customs and VAT Enforcement Caucus, which by 1999
had members from 20 industry sectors. The 1999 budget for the Caucus, funded by business,
was just over R300 000.
3 South Africa’s position in international trade
The imposition of tariffs on imports has been an important way in which countries throughout
the world have protected their economies from competition by goods from other countries.
Tariffs are set at different rates on different goods. The tariffs make imported goods more
expensive and in this way can help to protect local manufacturing and jobs in local industries.
Since the early 1980s, there has been an international move towards removing tariffs to allow
increased trade. This is part of a package of policies aimed at removing obstacles to ‘free’
economic activity internationally. Other parts of the package include deregulation of the
labour market, production and the sale of goods and services. Developing countries joined the
trend by shifting from import substitution to export promotion development models, or were
coerced through structural adjustment packages implemented to address foreign debt (Beneria
and Lind, 1995).
Trade is not a neutral process. Some people argue that trade has only positive impacts. Others
argue that trade liberalisation has only negative impacts. A third group argues that trade can
have positive impacts, but that the benefits of trade are often unevenly distributed because of
inequality in society. They argue that poor people, and particularly poor women, often bear
the brunt of the negative impacts of trade such as job losses or a pressure for wages to
decrease (Fontana et al, 1998; Elson, 2000).
In South Africa, the apartheid government used high tariffs to promote local production
(import substitution) so that South Africa could be independent of the rest of the world. While
other parts of South Africa’s import substitution programme started to fall away during the
1980s, high tariffs remained in place. Anti-apartheid sanctions also played a role in excluding
South Africa from international trade until the early 1990s.
Export-led growth is central to the post-apartheid government’s Growth, Employment and
Redistribution (GEAR) strategy for rebuilding the South African economy. Trade
liberalisation, including the lowering of tariffs, is a key part of this programme. Previous
research by the Women’s Budget Initiative (Valodia, 1996 and 1998) indicates that the effect
of GEAR’s trade reforms on women’s employment levels in the manufacturing sector is
likely to be negative, and that exports are likely to grow mainly in capital-intensive industries
which are less likely to employ women.
As a member of the World Trade Organisation (WTO), South Africa is committed to a
process of reducing tariff and other barriers to trade. This has meant wide-ranging changes to
the way in which production happens in both the manufacturing and agriculture sectors, and
has increased the options available to those involved in retail, trade and the provision of
The World Trade Organisation
The World Trade Organisation (WTO) replaced the General Agreement on Tariffs and Trade
(GATT) in 1995. GATT was one of three Bretton Woods institutions established after the
Second World War. The others were the International Monetary Fund (IMF) and the World
Originally GATT was intended to take an “integrated approach” to many issues related to
trade: securing jobs for all, reducing tariffs which stand in the way of economic growth,
protecting workers’ rights, preventing unfair domination and manipulation by big companies,
assisting weaker economies in getting access to capital and technology, and managing trade in
goods (Vander Stichele, 1997:3). However, in practice GATT focused mainly on trade in
agricultural and industrial products. It did not address the broader issues of jobs, worker
rights, development and competition policy.
Seven rounds of tariff reductions were negotiated under the GATT treaty. The final Uruguay
Round took place from 1986 to 1994, and established the WTO to implement the agreement.
The WTO’s mandate covers a broader range of areas than GATT. The WTO is also
responsible for implementing the General Agreement on Trade in Services (GATS) which
covers areas like telecommunications, banking and transport; and agreements on trade-related
intellectual property rights (TRIPS) and trade-related investment measures (TRIMS). GATT
had no legal ‘teeth’ to enforce rules, but the WTO can impose tough trade sanctions (Ellwood,
2000:9) The WTO currently has 137 member countries.
The WTO ministerial meeting in Seattle in late 1999 was intended to initiate a new round of
tariff reductions. Most African countries opposed the new negotiations until the full impact of
existing tariff arrangements has been assessed. The countries were concerned that the new
trade arrangements are benefiting only the richer countries, and that developing countries are
suffering under the WTO rules. The developing countries were supported by widespread civil
South Africa was a signatory to the first GATT agreement in 1947, remained part of the
international trading system throughout the apartheid years, and was an original member of
the WTO when it was founded in January 1995. When South Africa signed onto GATT, it
registered as a developed country, rather than developing. It has been unable to change this
status despite numerous attempts. The signing of the Uruguay Round agreement in April 1994
coincided with South Africa’s reemergence into the world economy, and the final step in the
policy shift from import substitution to trade liberalisation and export promotion.
As part of the Uruguay round, each country was required to lower tariffs on all products by
about one third over a fixed period, usually of five or six years. So, for example, if the US had
a tariff of 9% on a certain product, this needed to be lowered to 6%, whereas if South Africa
had a tariff of 30% on the same product, this needed to be lowered to 20% over the same
period. At the end of the period, South Africa would still have a higher tariff, but would have
made an adjustment of ten percentage points, compared to three percentage points in the US.
In the Uruguay round countries could negotiate concessions for sensitive industries in
exchange for improved offers on less sensitive products. This process was usually initiated by
the larger regions or countries such as the EU and US. Nevertheless, South Africa had the
status of an economy in transition and managed to ensure that the maximum tariffs were set
higher than would have otherwise been the case and the time period over which tariffs were to
be lowered was extended for sensitive sectors, such as clothing and textiles and the motor
South Africa’s Minister of Trade and Industry nevertheless decided to lower tariffs at a faster
rate and to lower levels than those South Africa is bound to by the WTO agreement.
Government argued that increased international competition would make companies more
productive. Others have argued that if this competition happens to quickly and without
enough support, it forces companies to retrench workers unnecessarily or to close. It can even
even destroy whole industries.
Apart from WTO, South Africa is party to many multilateral (between several countries) and
bilateral (between two countries) trade agreements. Customs and excise is responsible for
implementing and policing these agreements.
3.2 Multilateral agreements
The Southern African Customs Union (SACU) is a long-standing multilateral agreement
involving South Africa, Botswana, Lesotho, Namibia and Swaziland. Members of SACU
have common external tariffs and duties collected into a single revenue pool. This revenue is
then divided among the five member countries according to a formula weighted in favour of
the four smaller countries. The weighting was introduced to compensate for higher prices
resulting from South Africa’s high tariff barriers, the loss of fiscal independence as South
Africa sets the tariffs, and the uneven economic development that happens when smaller
economies are in a customs union with a much larger economy. The SACU agreement,
including the revenue-sharing formula, is currently being renegotiated.
SACU focuses on customs. It does not provide for freedom of movement of people across
national borders. So, for example, people from Botswana, Lesotho, Namibia and Swaziland
need work or residence permits before they can legally enter South Africa to look for
employment or live.
There is a world trend towards regional economic blocks such as the European Union (EU)
and the North American Free Trade Area (NAFTA). Beneria and Lind (1995) distinguish
between two types of regional economic arrangements. On the one hand, a common market
such as the EU gradually lowers tariffs, while moving towards a common external tariff, and
more similar social and monetary policies and programmes to compensate for the negative
effects of trade. A common market also aims at freer movement of people between countries,
and the gradual standardisation of wages and conditions of work.
On the other hand, a free trade area such as NAFTA emphasises free trade without a common
external tariff, equivalent social policies and ways to make up for any negative impacts of
trade. Goods and financial markets are allowed to operate without barriers in NAFTA, but
people are not allowed free movement between countries in the region. This puts workers in a
weaker position as they are not able to move to where the conditions of work and social
policies are best.
Two other, more recent, important multilateral agreements are the free trade agreements with
the Southern African Development Community (SADC) and the European Union (EU). These
agreements can provide opportunities in the form of bigger markets for producers, but also
expose the South African economy to increased competition. DTI did not investigate the
impact of these agreements on growth and employment in South Africa before signing. But
Newton et al (1999) speculate what some of the effects might be in terms of jobs for South
African women and men.
Probably only a small proportion of South Africa’s exports, mainly agricultural products, will
benefit from increased access to the EU market. The very protective approach of the EU on
agricultural products means that it is unlikely that a large number of jobs will be created.
(Newton et al, 1999:229) In fact, jobs are already being lost in the food processing industry as
a result of non-tariff barriers to trade with the EU (See box). Further, after signing the
agreement, the EU excluded port and sherry, and then ouzo and grappa. The EU argued that
these are brand names linked to specific places in Europe. The exclusion will hamper job
creation in agriculture as well as in the food and beverage sector, where women may have
been employed in light manufacturing processes.
Meanwhile South Africa has phased out agricultural control boards, deregulated the
marketing of agricultural products, and established the National Agricultural Marketing
Council. In 1999 the Council was planning research on problems experienced by
disadvantaged groups in accessing agricultural markets, but the research did not have a
specific focus on constraints experienced by women. Women were also not specifically
targeted in the Department of Agriculture’s programme for capacity building in agricultural
and trading co-operatives (Newton et al, 1999:252).
The EU is likely to benefit from the agreement through improved access to the South African
market for high-value products such as motor vehicles, telephone equipment, electronics,
aircraft and machinery. Increased imports from the EU in these sectors may have a negative
impact on jobs in South Africa. These industries mainly employ men, so it is they who will be
affected (Newton et al, 1999:229-230).
The EU agreement allows South Africa to increase protection if EU products threaten to cause
serious injury to companies in new industries or whole industry sectors, and where this will
cause serious social problems. This could provide a way for women’s jobs in sectors such as
agriculture, food processing and clothing to be protected. However government will first need
to provide resources to monitor the employment effects of the agreement.
The SADC Trade Protocol will come into force on 1 September 2000. The agreement is likely
to result in increased exports of low-value, labour-intensive goods from the other SADC
countries to South Africa, while South Africa while increase exports to them of capital-
intensive, high-value goods. This is likely to cause a fall in women’s employment
opportunities in South Africa, at least in the short-term (Newton et al, 1999:230).
3.3 Imports and exports
South Africa’s imports and exports are documented by Customs and Excise according to the
23 sections of the ‘harmonised system’. This is an international system of classifying goods
according to six digit tariff headings. So, for example, all textiles and textile products (fabric,
clothing, linen) will have the first digit in common, but each of the remaining five digits will
define smaller and smaller categories within textiles. All countries are supposed to use the
same tariff headings up to at least six digits. But the tariff headings of many countries in
Africa, including some in South Africa, are only compatible with international norms up to
Unfortunately, the harmonised system for imports and exports is difficult to compare with the
International Standard Industrial Classification (ISIC) system used to report employment
trends. For example, under the harmonised system, plastics and plastic products is one section
together with rubber and rubber products. But under the ISIC system, plastic products and
rubber products each form a section on their own, with the manufacture of plastics and
synthetic rubber falling under another section - basic chemicals. This makes it difficult to look
at the relationship between trade and employment for all sectors of the economy. The UN has
approved a method for comparing the two systems, but it is difficult to use this for South
Africa because not all the six digit tariff headings are in line with the international system. In
South Africa, the Industrial Development Corporation (IDC), a parastatal, has established a
method for comparing codes in the two systems, and could do this work for DTI.
Table 1 records imports to SACU and Table 2 records exports from SACU for sections which
are significant employers of women. The tables show a fluctuating trend in terms of value for
imports and exports as a whole as well as for most of the categories. The only clear pattern is
a steady decrease in the value of vegetable products imported. In every year SACU countries
imports in vegetable products and food and beverage were worth less than exports, while
imports of textiles, clothing and footwear outvalued exports.
Table 1: Imports to SACU for selected categories (R million)
Section II IV XI XII I-XXIII
Industry Vegetable Food and Textiles and Footwear Total
products beverage clothing
1996 2 931,6 2 583,0 4 240,2 931,8 115 537,4
1997 2 655,1 2 832,5 4 410,4 956,6 119 407,9
Change from 1996-7 -9% +10% +4% +3% +3%
1998 2 519,5 2 779,2 4 557,0 927,7 125 187,0
Change from 1997-8 -5% -2% +3% -3% +5%
1999 2 356,2 2 510,0 4 138,2 964,4 119 848,4
Change from 1998-9 -6% -10% -9% +4% -4%
Table 2: Exports from SACU for selected categories (R million)
Section II IV XI XII I-XXVIII
Industry Vegetable Food and Textiles and Footwear Total
products beverage clothing
1996 5 167,7 5 127,4 2 872,6 193,1 126 044,9
1997 5 331,9 5 035,6 3 188,1 140,4 132 190,3
Change from 1996-7 +3% -2% +11% -27% +5%
1998 4 887,9 5 182,9 2 815,6 125,3 128 967,6
Change from 1997-8 -8% +3% -12% -11% -2%
1999 5 262,8 5 064,1 2 835,0 150,3 132 957,5
Change from 1998-9 +8% -2% +1% +20% +3%
Note: Based on figures from SARS. Figures have been adjusted for inflation to 1996 prices.
Trends in trade take time to emerge, and it is important to look at patterns over a long period
to analyse the impact on employment. South Africa’s established trade pattern is to export
mainly primary goods (like gold or steel) and import mainly labour-intensive manufactured
goods (like clothing or processed food). This is not good for the economy. Relying on exports
of primary goods is dangerous because the international prices can change dramatically. Also,
it does not encourage the creation of jobs.
From 1993, the shift in composition of exports towards capital-intensive goods happened
faster than it did between 1984 and 1993. At the same time, imports have risen strongly in the
more labour-intensive production sectors. Some research has shown that, overall, trade flows
have had a limited impact on total employment. But the pattern of trade means that people
with more skills are benefiting from trade-related increases in employment. And people with
lower levels of skills are suffering from trade-related job losses (Edwards, 1999:15).
4 Revenue collected by customs and excise
Revenue collected by customs and excise formed 24% of total budgeted government revenue
in 1999/00. Table 3 shows the contribution by customs and excise in rand and percentage
terms from the 1994/95 to the 1999/00 budgets. It shows that the percentage contribution has
remained in the range of 23-5% of nationally collected revenue throughout the period.
Table 3: Customs and Excise revenue
Budget year Customs and Excise Total revenue Customs and Excise
(R million) (R million) ( % of total)
1994-1995 31 172,8 125 137,4 25%
1995-1996 35 741,9 145 619,7 25%
1996-1997 40 695,8 170 020,6 24%
1997-1998 44 108,5 188 176,0 23%
1998-1999 49 349,1 210 471,2 23%
1999-2000 52 632,8 214 951,8 24%
Note: Based on figures supplied by SARS. The figures include all revenue collected into the
common SACU revenue pool.
The money collected by Customs and Excise through tariffs on imports into SACU is
distributed between SACU members according to a revenue-sharing formula. Table 4 shows
the amount of these payments from 1994/95 to 1999/00, the adjusted revenue for South Africa
after deducting these amounts and the adjusted contribution to total government revenue. The
percentage contribution drops slightly from that shown in Table 3, to 21-2%.
Table 4: Payments by South Africa to other SACU countries
Budget year SACU payment Adjusted Customs & Excise Adjusted Customs & Excise
(R million) (R million) ( % of total)
1994-1995 3 248,8 27 924,0 22%
1995-1996 3 890,1 31 851,8 22%
1996-1997 4 362,7 36 333,1 21%
1997-1998 5 237,2 38 871,3 21%
1998-1999 5 576,7 43 772,4 21%
1999-2000 7 197,3 45 435,5 21%
Source: Based on figures in Department of Finance (1999:193-195)
Although the amounts paid over to the SACU countries are relatively small for South Africa,
they are very important for the other member countries. For example, customs revenue
provides half the government income of Swaziland and Lesotho (Business Day, 7 October
1999). In these and other developing countries it is often most cost-effective to collect tax
revenues at the border where there is existing administrative infrastructure than to broaden the
tax net in other ways. The United Nations has estimated that the administrative cost of
collecting trade taxes amounts to 1-3% of GDP, compared with 10% for income taxes (United
Table 5 shows the composition of revenue collected by Customs and Excise between 1994/95
and 1999/00 in rand and percentage terms. The most marked changes are the increasing
contribution of VAT on imports and the decreasing contribution of the ‘other’. The latter
reflects the phasing out of import surcharges.
Table 5: Customs and Excise revenue
Customs Excise Luxury Fuel levy VAT on Other Total
1994/95 Rm 3 706,6 5 431,3 964,6 8 351,5 11 410,9 1 307,9 31 172.8
% 12% 17% 3% 27% 37% 4% 100%
1995/96 Rm 4 700,5 6 075,0 1 082,0 8 928,0 14 169,0 787,5 35 741,9
% 13% 17% 3% 25% 40% 2% 100%
1996/97 Rm 5 536,8 5 984,5 1 723,9 10 391,6 16 608,3 450,7 40 695,8
% 14% 15% 4% 26% 41% 1% 100%
1997/98 Rm 5 287,2 7 425,8 1 369,4 12 091,2 18 371,3 -436,4 44 108,5
% 12% 17% 3% 27% 42% -1% 100%
1998/99 Rm 4 920,1 8 052,8 1 601,9 13 640,0 21 085,7 48,6 49 349,1
% 10% 16% 3% 28% 43% 0% 100%
1999/00 Rm 5 289,2 8 889,4 1 825,8 14 289,8 22 092,3 246,2 52 632.8
% 10% 17% 3% 27% 42% 0% 100%
Note: Based on figures supplied by SARS. Customs revenue figures include all revenue
collected into the common SACU revenue pool.
The excise column in the table records revenue from ‘sin taxes’ on products like alcohol and
tobacco. Despite annual complaints about increases in these taxes from (mainly male)
consumers, their percentage contribution to revenue has not increased. The percentage
contribution of revenue from taxes on luxury or ‘non-essential’ goods such as perfume,
watches, computers, and cellular phones bought predominantly by wealthier people has also
The contribution of customs duties to Customs and Excise revenue has fallen slightly from
12% in 1994/95 to 10% in 1999/00. While absolute figures have not been adjusted for
inflation, the lower rate of increase in customs revenue probably reflects the lower tariffs
introduced as part of government’s trade liberalisation programme. SARS (undated:5) expects
that customs tariffs will collect less revenue over time because of global trends and trade
agreements. However, there is still a lot of room for improved efficiency of the customs and
excise function and stamping out of corruption. Both of these would help to offset the
In 1999/00, customs duties contributed 2,5% of total government budgeted revenue. While
this is a substantial amount of money, it is relatively small in percentage terms. The role of
customs in protecting the economy appears to be more significant than its contribution to
revenue. Any assessment of tariffs and the customs service, particularly from a gender
perspective, thus needs a strong focus on this area.
The amount of revenue collected from customs duties can be analysed according to the 23
sections of the harmonised system. Table 6 presents the five top earners of customs revenue
from 1995 to 1999. Two of the sections – food and beverages and textiles and clothing – are
among those we identified above as places where women are likely to be employed.
Table 6: Top five earners of customs duties in SACU
Section IV VII XI XVI XVII
Industry Food and Plastics and Textiles and Machinery and Motor
beverage rubber clothing electronics
Rm % of Rm % of Rm % of Rm % of Rm % of
total total total total total
1995 411,8 9% 369,7 8% 465,5 11% 944,6 21% 591,0 13%
1996 485,3 10% 391,8 8% 522,2 11% 892,2 18% 818,6 17%
1997 515,3 11% 442,0 9% 683,0 14% 719,9 15% 760,6 16%
1998 529,9 11% 485,0 10% 765,7 15% 835,4 17% 610,9 12%
1999 466,1 9% 485,7 10% 821,9 17% 808,1 16% 505,7 10%
Note: Based on figures provided by SARS
Products from the five sections have consistently accounted for 62-5% of all income from
duties between 1995 and 1999. The contribution from textiles and clothing increased from
11% in 1995 to 17% in 1999, while that for machinery and electronics decreased from 21% to
Most duties collected by customs are ad valorem tariffs. This means that the amount of the
tariff depends on the value of the goods brought in. For example, if the tariff is 20%, the duty
will be R20 000 on imported goods valued at R100 000 and R2 000 on imports valued at
The shift to ad valorem duties was part of the changes introduced in the Uruguay round. Ad
valorem duties make it easier to compare tariffs across countries. But they also mean that
customs staff must be skilled in assessing the value of goods to check if it is in line with the
value stated on the import documents.
5 How tariffs affect women
There are three ways in which the customs and excise function of government affects women.
The first is that women are affected as workers in sectors of the economy where goods are
imported and exported. For example the clothing industry and agricultural sectors, both of
which feature prominently among exports and imports, are important employers of urban and
Secondly, South African women are consumers of imported goods. For example, women
usually take more responsibility for family health care than men. They are likely to benefit
from the importation of cheaper medicines.
Thirdly, women are traders in goods. The actions of customs and excise influences traders’
choice of products, their prices, and the price and quality of products they need to compete
The following sub-sections look in more detail at how tariffs affect women in these three
different roles of worker, consumer and trader.
5.1 Women as workers
The Department of Trade and Industry argues that there is no clear relationship between
government’s trade liberalisation programme and employment levels. But research suggests
that government’s trade policy is impacting negatively on employment, and women are
bearing the brunt of job losses (Newton et al, 1999:225).
One way in which women are affected is when industries where they predominate suffer from
trade liberalisation. Women predominate in labour-intensive industries. The ease of capital
mobility in labour-intensive industries means they are often worst hit by tariff reductions.
Affected sectors that are important employers of women include fruit farming, fruit and
vegetable canning and the clothing industry.
Who lose their jobs first?
In addition to women’s predominance in vulnerable sectors, within all sectors women often
stand a greater likelihood of being retrenched. Firstly, the restructuring of the economy has
led to a decreasing demand for less skilled workers, and 49% of employed African women
and 41% of employed ‘coloured’ women are classified as unskilled (Horton, 1999:1).
Secondly, the last-in-first-out principle, the main criterion used in retrenchment, can affect
women and men differently. If women take time off from working to have babies, they may
have shorter service in their most recent job. This makes it more likely that they will be
among the ‘last in’ (Newton et al, 1999:216). Thirdly, there are still many people who see a
man as a breadwinner, but think that women work only to earn ‘pin money’. These people
will say that when jobs are lost, women must go first.
Before the Uruguay Round, agriculture was internationally one of the most protected sectors.
At that time protection was largely based on quantitative restrictions such as quotas on
imports and complicated formula duties, rather than tariffs based on the value of goods. There
were many loopholes in the system that were widely exploited. The first step under the WTO
was to change to a tariff-based system at the same high levels of protection. It was only after
this step that tariffs were phased down. This means that the impact of the new trading
arrangements in agriculture are being felt later than in other sectors.
Employment in agriculture in South Africa has been falling since the mid-1960s (Kirsten and
Vink, 1999). The drop in employment has not stopped with trade liberalisation and is
expected to continue, but at a slower rate.
Some employment growth is expected to accompany export growth in fruit and wine from the
Western Cape, as well as the growth of non-farm service activities such as restaurants and
guesthouses (Vink and Kirsten, 1997). However, many of the job opportunities are likely to
be seasonal and casual as farmers attempt to avoid labour and land tenure laws (Sunde and
Kleinbooi, 1999:12-3). In addition, the difficulties experienced by South African farmers in
adjusting to international competition mean that many farm workers will lose their jobs in the
period of transition. Reports suggest that some fruit farmers mismanaged investment in the
previous protected environment, preferring to “upgrade the bakkie, or plough profits into yet
another farm” rather than build up capital reserves and establish new cultivars (Mail and
Guardian, 26 May-1 June 2000).
Sex-disaggregated figures are not available by sub-sector in agriculture. However labour-
intensive sub-sectors like deciduous fruit (such as grapes, apples and pears) are known to be
important employers of women. Within these sectors, women are most likely to be employed
as temporary or seasonal labour. While 53% of workers in the fruit sector are women, women
make up 75% of temporary workers and 65% seasonal labour (Barrientos et al, 1999:9). So
women may benefit from increased employment in these sectors, but much of the
employment will be insecure casual and seasonal work.
5.2 Women as consumers
For poor women, the reduction of tariffs on basic goods such as clothing and food will mean
they may be able to buy these goods at the lowest prices available internationally. Either
South African goods will become cheaper and improve in quality (because local producers
lower their prices and improve quality to match those of imported goods), or goods will be
imported from other countries that make cheaper goods. Because women are often responsible
for providing for their families on meager household budgets, this makes women’s lives a bit
On the other hand, we must weigh up the benefit of lower priced goods against the cost of
jobs to the economy. Many of the countries from which South Africa can import cheap goods
are only able to produce more cheaply than South Africa because wages are much lower and
workers in those countries do not have organisational rights which would help them fight for
better wages and conditions. The downward pressure on wages internationally created by
oppressive conditions in exporting countries is of little benefit to the poor in South Africa in
the long run.
5.3 Women as traders
The only sector of the economy which created jobs between March 1996 and March 1999 was
retail, wholesale and accommodation (Horton, 1999:1). The relative success of this sector
could be linked to trade liberalisation, which allows local retailers and wholesalers to compete
with local producers by importing cheaper products and selling more to customers. But
women do not necessarily benefit from this increase in employment. Official figures show
that nearly 20% of jobs created in the trade sector are part-time. Independent research
estimates the figure to be as high as 45% (Horton, 1999:1). Women are more likely than men
to be employed as part-time or casual workers in the retail sector, or to work as informal
It is difficult to assess the impact of trade liberalisation on women and men who are informal
traders on the street. Women account for more than three quarters of survivalists in the
informal economy (Ntsika 1997:8). Street traders tend to be poorer than other workers in the
informal economy, and more women than men tend to trade on the streets. Few traders are
there by choice – they are pushed into it because no other employment can be found (Lund et
The quality of official statistics available on the informal economy is poor. This makes it
difficult to look at different sectors in more detail. A local survey in Durban showed the
following sectoral breakdown of street traders:
• 46% sell food such as fruit, vegetables, meat and poultry;
• 32% sell products such as cosmetics, clothes, shoes, cigarettes and curios;
• 22% are involved in service activities like hairdressing and shoe repairs (Lund et al,
Women predominate among the fruit and vegetable sellers, where it is most difficult to make
Many of the goods traded on the streets, such as fruit, clothing and shoes, are widely traded
internationally. But poor street traders are unlikely to have access to cheaper imports, unless it
is through agents who are importing goods in bulk. A survey in Durban showed that over 88%
of traders were independent (Lund et al, 2000:24).
Tariffs and job loss in the clothing and textile industry
The number of workers in the formal sector of South Africa’s clothing and textiles industry
has declined dramatically since the lowering of tariffs in September 1995. The job loss
database of the Southern African Clothing and Textile Workers’ Union (SACTWU) recorded
14 000 job losses through retrenchment, factory closures and liquidations in 1999 alone. In
1998, 22 000 workers in the industry lost their jobs. This shedding of jobs is part of a longer-
term trend. In the 18 months from September 1995 to March 1997, over 40 000 clothing,
textile and leather workers lost their jobs.
Official statistics confirm that clothing workers have been relatively worse affected by job
losses than workers in other industries in the manufacturing sector. While overall job losses in
manufacturing between June 1996 and June 1999 were 9%, for clothing the figure is 19%.
Over that period, job losses in the clothing industry accounted for 22% of job losses in
manufacturing. (Based on various publications of Statistics SA.)
Some people argue that the job loss has not been as severe as it seems, because many of those
who have lost formal jobs are now working in the informal economy. It is very unlikely that
the number of new jobs in the informal sector equals the tens of thousands lost. Further,
workers in the informal sector generally have much lower earnings than those in the formal
sector, and also don’t have access to employer and state benefits.
Worldwide the clothing industry is recognised as sensitive because the costs of starting a
business, particularly for the production of goods at the lower end of the market, are so low.
Under GATT, textiles and clothing were exempted from the main agreement and a separate
Multi-fibre Arrangement (MFA) was negotiated. The MFA allowed developed countries to
impose quotas on imports from developing countries, and kept tariffs at fairly high rates.
Under the WTO, the MFA quotas will be phased out by 2005, and tariffs have been reduced.
South Africa has lowered tariffs on clothing and textiles faster, and to lower levels, than
required under the WTO. Tariffs have been lowered before the implementation of policies to
assist companies face the increased competition.
The renegotiation of South Africa’s bilateral trade agreement with Zimbabwe is one example
where the employment impact of trade was taken into account. SACTWU insisted on being
part of the process of renegotiating the trade deal, and tried to ensure that the Zimbabwean
union also participated. SACTWU’s approach was that the South African industry must be
allowed sufficient time to develop in higher value-added areas before being open to
competition from Zimbabwe – where wages are much lower – in more sensitive areas at the
lower end of the market.
South African labour, business and government worked together to solve the problems. The
union drove the process, while business provided some expertise and personnel. Government
has now allocated funds to improve policing.
6 Non-tariff issues
6.1 Non-tariff trade barriers
Sometimes, a country may lower tariffs, but put in place other measures that prevent other
countries from competing fairly. Non-tariff barriers are often used to protect sectors such as
agriculture and food processing, both of which provide a significant number of jobs to
women. The barriers range from general or export subsidies to unnecessary technical
requirements or complicated customs procedures.
South Africa is currently phasing out the General Export Incentive Scheme (GEIS). This
programme constitutes a non-tariff barrier in terms of WTO rules because it subsidises
exporting firms. Meanwhile South Africa’s trading partners are not necessarily removing their
non-tariff barriers. The box outlines how the European Union’s Common Agricultural Policy
is damaging the lives of women working in South Africa’s fruit canning industry, despite
South Africa’s free trade agreement with the EU. The customs service has a role to play in
monitoring imports of sensitive product groups that benefit from measures such as CAP.
The EU’s Common Agricultural Policy
The EU’s Common Agricultural Policy (CAP) sets minimum prices that farmers in the region
are paid for their products. These prices are far above world market prices. Several tools are
used to maintain these high prices and protect EU farmers from competition. Besides high
tariffs, there are direct aid payments to fruit and vegetable farmers and extensive government
assistance to fruit producing and processing companies. Half of all assistance in the fruit and
vegetable sector takes the form of processing and marketing aids (Head, 1998:5). The 40 000
million ECU spent annually on the implementation of CAP is a subsidy that, together with
high tariff barriers, makes it more difficult for imports to compete on the EU market. They
also makes it easier for EU exports to compete in other countries.
The South African the fruit and vegetable canning industry has been particularly hard hit by
competition from the EU. GEIS had roughly compensated South African fruit canners for the
competitive disadvantage created by high EU tariffs and CAP. After GEIS was removed in
1997, the South African industry could no longer compete with the EU in third markets such
as Japan, the United States, Brazil and Argentina (Head, 1998:7).
As a consequence, the volume of soft fruit handled dropped dramatically in 1997, and one of
the four fruit canning factories in the Western Cape was scaled down to produce only for the
local market. All these factories employed mainly women. The job losses resulting from the
loss of export sales included 120 permanent jobs and 3 000 temporary jobs. It is estimated
that a further 800 permanent jobs and up to 4 000 seasonal jobs have been lost on the fruit
farms that supplied the factory (Head, 1998:7). There are very few employment alternatives
for the women who lost their jobs in this process.
Export Processing Zones (EPZs) are another way in which governments of some other
countries give companies producing there an unfair advantage. In EPZs, companies’ exports
are subsidised through tax rebates or through lower wages achieved by relaxing labour laws
and suppressing worker organisation. Internationally this impacts on women particularly, as
they are more likely to be employed in the labour-intensive industries that are located in
The labour movement in South Africa has resisted the formation of EPZs in this country. The
unions have also argued that goods produced in EPZs should not benefit from lower tariffs
provided by multilateral and bilateral trade agreements.
More broadly, the South African labour movement has argued that a social clause should be
included in all trade agreements to ensure that minimum labour standards are maintained in
all countries in the world. By linking trade and labour standards, the South African unions and
the International Confederation of Trade Unions (ICFTU) hope to protect workers around the
world from extreme forms of abuse in line with the core conventions of the International
Labour Organisation (ILO). Two of the core conventions are particularly important for
women - one on non-discrimination including on the basis of sex, and one on pay equity
between women and men. Some people, including some trade unions in developing countries,
argue that linking trade and labour rights is just another form of trade protection used by
countries with higher wages, which are also often the wealthier countries. However, the
suppression of very basic worker rights is a barrier to fair trade.
6.2 Customs fraud
Illegal imports account for a major part of customs fraud. One form of illegal imports is goods
such as ‘harmful’ drugs and unauthorised firearms. A second form is imported goods that
have been undervalued or described incorrectly to avoid higher tariffs. It is these illegal
imports that affect employment most. Because the tariffs have not been paid, and South
African industry is struggling to compete with international producers even with tariffs, local
manufacturers cannot compete against illegally imported goods.
The customs service does not collate figures on the quantity and value of goods seized or
redirected. Information on the sectors affected by illegal imports is therefore not easily
accessible to policy makers. According to officials in the national customs and excise office,
the information is kept by individual customs offices throughout the country. However the
state warehouse in Cape Town could not provide the information. Records of seized or
redirected goods are kept in a manual register rather than on computer. A simple description
of the goods is recorded and they are not even listed by tariff heading. According to officials
at the warehouse, a computerised system will be in place in two years time. The new system
will allow analysis by tariff headings and broader categories.
Goods featuring in press reports of illegal imports include clothing and textiles, cars, car tyres,
electronic goods, toys, cigarettes and alcohol. The clothing industry is the area where
women’s jobs are most likely to be affected.
Another form of customs fraud is ‘VAT round-tripping’. This is when imported goods are
fraudulently declared to be in transit for export outside SACU (removals in bond) or outside
of SACU (removals in transit). The necessary VAT, excise and other duties are therefore not
paid on these articles. The goods are then either sold on the South African market or exported
under the pretence of having been produced locally, so a VAT refund can be claimed.
The customs transformation programme provides for the establishment of 17 new border
posts staffed by VAT administrators on the borders with Botswana, Lesotho, Namibia and
Swaziland to deal with this problem (Business Day, 14 September1998).
While VAT round-tripping does not necessarily affect women differently than men, the
general impact is that government revenue suffers. This is likely to have more severe
consequences for the poor who are most in need of government social spending, and for poor
women who have borne the brunt of past disadvantage. Table 5 shows that VAT has
contributed an increasing proportion to revenue collected by customs over the past few years.
VAT round-tripping is thus of serious concern.
Business Day (6 March 2000) reported that a customs blitz on the clothing and textile industry
from August to November 1999 found that 29% of examined clothing shipments and 41% of
detailed textile shipments were incorrect. The institution of blitzes is an encouraging sign that
government is taking the problem of customs fraud seriously. However, only 36% of all
clothing consignments and 21% of all textile consignments were checked in that blitz.
Customs officials claim that ‘improved risk profiling’ has increased the chance that incorrect
shipments are uncovered. But, with such a high percentage of incorrectly documented
shipments it is likely that many more fraudulent consignments of clothing passed through
customs undetected. An amount of R2,7 million in additional revenue and R0,5 million
penalties were collected in the blitz and 14 consignments of illegal imports were seized.
Traders in the informal economy are often accused of being sellers of illegally imported
goods. However, there is substantial evidence that customs fraud is also practised by
companies in the formal economy. The evidence suggests that informal trading networks are
not necessarily the main culprits. In fact, customs fraud by formal companies may be putting
survivalist informal traders who do not have access to imported goods at a disadvantage.
In the past, Customs auctioned any seized goods for resale. This often had the same affect on
jobs as allowing the illegal imports through. SACTWU managed to halt the auction of seized
clothing and textiles. The alternative options explored ranged from burning the goods to
putting out a tender for re-export to the country of origin. Customs was concerned about
covering the costs of storage in disposing of the goods. The union’s main concern was to
protect local jobs from unfair competition. Both Customs and the union wanted to ensure that
goods that could be useful to people in need were not simply destroyed. In the end the
clothing was donated as part of South African humanitarian aid to war-torn countries in
Central Africa. This solution is likely to have been of particular benefit to women who are
more likely to have been responsible for the care of their families in a war or refugee
There have, however been times when goods seized by customs have simply been burnt. In
other caes goods have been sold to countries from which they were unlikely to find their way
back to South Africa. In 1998, two sales of 1 000 tons of confiscated textiles to “countries
north of the equator” raised R5,1 million (Business Day, 6 January 1999).
Customs is responsible for collecting the duty on imported products for which the Minister of
Finance has imposed a dumping duty. Goods are considered dumped when the export price is
less than the ‘normal’ price the goods would have sold for in the exporting country, less than
they are being sold for to a third country, or less than what it cost to produce the goods.
Companies dump goods in other countries to prevent the price from dropping too low in their
own country. They do it to protect the industry in their country, without any concern for
producers and workers in the country where the goods are dumped.
The WTO agreement provides for anti-dumping measures so that countries can defend
themselves against this form of action. WTO rules say a country can only impose a dumping
duty if it can prove that the goods have been dumped and that the dumping has caused injury
to the industry in the importing country. The process that must be followed before a dumping
duty is imposed is complicated and expensive. This is intended to ensure that the anti-
dumping measures are not abused. But it also makes it easier for countries and industries with
more resources to take anti-dumping action.
Internationally, anti-dumping activity has increased since the Uruguay Round. Traditionally,
Europe, Australia and the United States have been most effective in using dumping duties to
protect their economies. South Africa is the fourth largest international user of the anti-
dumping instrument. It is the largest of the new non-traditional users and initiated 129 anti-
dumping actions from 1993 to 1998.
Table 7 shows which South African industries, according to the harmonised classification,
have used the anti-dumping instrument. The more capital-intensive industries such as metals,
chemicals and plastic are clearly the primary users, with labour-intensive textiles near the
bottom of the table. Anti-dumping actions in the area of agriculture are expected to increase
as protective tariffs are lowered in line with WTO arrangements (Board on Tariffs and Trade,
1999:5) Already, since 1998, South Africa has initiated two anti-dumping actions in
Table 7: South African industries using anti-dumping instruments, 1993-1998
Section number Industry Number of actions
XV Base metals 32
VI Chemicals 25
VII Plastics 20
X Pulp and paper 12
XVIII Optical, medical or surgical 11
XVI Machinery and mechanical 11
XIII Ceramic and glass 9
XI Textiles and textile articles 6
XII Footwear 2
XVII Vehicle and associated 1
Source: Board on Tariffs and Trade (1999)
Women would most likely be affected by measures relating to the textiles and clothing and
footwear industries. Without anti-dumping measures, employees in these industries might lose
their jobs through retrenchments or factory closures because of the unfair competition.
Table 8 shows anti-dumping actions taken by other countries against South Africa. Overall,
there have been far fewer actions against than by South Africa. Again, most of the actions are
in capital-intensive industries.
Table 8: Anti-dumping actions against South African industries, 1993-1998
Section number Industry Number of actions
XV Base metals 15
VI Chemicals 4
X Pulp and paper 3
XIII Ceramic and glass 3
IV Prepared food and beverages 2
XVI Machinery and mechanical 1
Source: Board on Tariffs and Trade (1999)
The Board on Tariffs and Trade (BTT), which is funded through the DTI budget, counters
anti-dumping actions by other countries where it is considered appropriate for government to
defend local producers. Jobs can be lost if companies affected by the anti-dumping action are
no longer able to export their products and so retrench workers or close altogether. Women
are most likely to be affected by anti-dumping actions against South Africa in the prepared
food and beverage sector.
Relative to other countries, South Africa’s anti-dumping capacity is very limited. Between
1996 and 1999 South Africa had 18 staff members working on 104 anti-dumping
investigations, whereas the US had approximately 506 personnel involved in 101
investigations. Table 9 shows the number of staff and number of investigations in different
Table 9: Anti-dumping staffing capacity (1996-1999)
Country Approximate full-time Number of anti-dumping Ratio of
equivalent staff investigations investigations:staff
USA 506 101 0,2
EU 240 121 0,5
Canada 174 37 0,2
Argentina 60 56 0,9
Egypt 60 8 0,1
Thailand 56 4 0,1
Venezuela 21 20 1,0
South Africa 18 104 5,8
Note: Figures provided by Leora Blumberg of BTT. Staff figures are estimates, as not all staff
work full-time on anti-dumping issues.
For anti-dumping action to be taken in South Africa, an industry in SACU must petition
government and provide enough information for the case to be taken seriously. BTT then
investigates the matter, and makes a recommendation to the Minister of Trade and Industry.
The Minister, in turn, recommends to the Minister of Finance whether a duty should be
One way in which government has tried to overcome the capacity problem is to encourage
and train industries to collect as much of the necessary information as possible. A special
liaison section of BTT does this work. However, the liaison section is also under-staffed.
Table 7 suggests that capital-intensive industries such as metals, chemicals and plastics which
are dominated by a few companies are most likely to have the resources to take action. The
industries that struggle most to meet the information requirements are those where there are
many small producers, such as clothing and textiles and agriculture. These are also the
industries where women are most likely to be employed, or – in the case of agriculture –
where employment is particularly important for poor rural women.
The anti-dumping unit in BTT hopes to have more staff allocated as part of DTI’s
restructuring process. It also encourages NEDLAC, employer associations and trade unions to
take more responsibility for collecting information required to prove that goods are being
dumped and that dumping is causing damage to industries in SACU.
6.4 Rules of origin
Customs is responsible for confirming that imports comply with rules of origin provisions in
trade agreements. Rules of origin state how much of a product must be made in the exporting
country or region that is benefiting from a lower tariff in a trade agreement with the importing
country. There are rules of origin requirements in both the EU and SADC agreements, as well
as in some bilateral agreements.
Rules of origin prevent, for example, another southern African country importing clothing or
footwear from Asia, making minor additions like adding labels or laces, and exporting the
goods to South Africa under lower SADC tariffs. This can help to retain and possibly even
create jobs in SADC. It is particularly important for women who are more likely to work in
industries which are labour intensive and more open to competition on the basis of low wages.
Pep in Malawi
In the mid-1990s, Pep, a large clothing company producing for the mass market, moved some
of its production capacity to Malawi. It did so to take advantage of duty-free provisions in
South Africa’s bi-lateral trade agreement with Malawi. Rules of origin in the bi-lateral
agreement were weak. They stated that only 25% of the value of the goods needed to be
added in Malawi (Kabemba, 1996:17-19). So Pep’s factory in Malawi did only minor
operations on garments imported from Asia, and then exported these clothes to South Africa.
With the introduction of the new rules of origin in the SADC Protocol, it seems that Pep has
decided to close down its Malawi operation.
Monitoring rules of origin is a new area of expertise that the customs service still needs to
develop. Resources will need to be allocated to train staff to ensure compliance.
COSATU has proposed that a multilateral Independent Complaints and Investigations
Commission be set up in SADC. The Commission would conduct investigations and seize
goods in any SADC country and so overcome the problem of officials in some countries
being reluctant to act because particular companies would benefit if the rules are not fully
applied. A Commission will also prevent problems that have been experienced by South
Africa where goods move freely – without tariffs being applied – across other borders within
SACU, while South Africa is only responsible for policing its own borders.
Customs expertise in monitoring rules of origin will be even more important for women in the
future if consumer campaigns use product labelling to encourage South Africans to buy
products that are either locally made, or made in the SADC region, or made under fair labour
conditions. Such initiatives will allow women as consumers of products to influence trade and
labour rights, and can help to protect the rights of women workers in South Africa, in the
region and internationally.
6.5 Intellectual property rights
A patent gives a producer the right to be the only one making a particular product or using a
particular process to make a product. In this way patents are intended to protect the
‘intellectual property rights’ of people who invent things or companies who invest large
amounts of money to develop new products or improve products.
Patents are granted by national governments, but the WTO agreement on trade-related
intellectual property rights (TRIPS) introduced an international framework for dealing with
patents. TRIPS is very controversial because it is usually big companies and companies based
in richer countries that have the large amounts of money needed to prove that they ‘know’
something new and to find new ways of making money with this ‘new knowledge’. So, for
example, large multi-national firms have patented traditional medicines used for centuries by
women in developing countries.
Before the Uruguay Round, many countries did not issue patents for drugs, so the patent
holder had no particular right over a product in that country and copies of patented drugs from
other countries could be made legally (Velasquez and Boulet, 1999:12). The patent system
may benefit public health by providing incentives for innovation. However, some developing
countries have a policy of copying patented drugs to make generic drugs that are the same, but
do not carry the brand name used by the owner of the patent. This policy has been successful
in providing drugs to the poor but will be more difficult to implement under TRIPS
(Velasquez and Boulet, 1999:15).
The WTO rules on intellectual property rights make certain products that are patented by
foreign companies more expensive for South African consumers. This often means, as in the
case of drugs needed to treat HIV/AIDS, that only rich people have access to them. The
expense also makes it more difficult for governments of poorer countries to provide the
treatment through the public health care system. An analysis of ten drugs used to treat
HIV/AIDS reveals that the minimum price in countries where generic drugs are available is
on average 82% less that the United States price. The availability of generic drugs in Brazil
means that the government there can treat 1 000 people with a two-drug therapy for the same
amount of money that the Ugandan government spends on treating just 228 people (Mail and
Guardian, 14-20 July 2000).
Lack of access to drugs affects women even more than men, as women are most often the
caregivers in communities. In the case of HIV/AIDS it also affects women more as they are
more likely than men to be infected due to a wide range of social, economic and biological
reasons (Department of Health, 1998:14). The World Health Organisation (WHO) estimates
that on average between 12 and 13 African women are infected with HIV/AIDS for every ten
African men (1999:14).
Many policy makers are now saying that rich countries should simply allow poor countries to
declare health emergencies in a crisis, and allow them to seize the patents to make their own
generic versions or buy them from India, Brazil or other countries that ignore Western patent
law. At a global convention of health ministers, those from poor nations asked the WHO to
help change the patent laws of the USA and European countries so they could buy the
cheapest generic AIDS drugs, whether from those countries or from countries that do not
honour the laws (Mail and Guardian, 26 May-1 June 2000).
The WTO’s TRIPS Agreement permits countries to allow the ‘parallel importation’ of a
patented product without the approval of the patent holder from another country. South Africa
is in the process of passing a law that will allow parallel importation of drugs needed to treat
HIV/AIDS. This was not done previously because of an unwritten agreement with companies
investing in the local drug industry that they would be protected from the competition of
parallel imports. The Pharmaceutical Manufacturers’ Association has tried, through legal
challenges, to protect their members’ existing rights under this agreement.
There is a danger that parallel importation of drugs will discourage patent holders from
investing in the local industry or giving out licences for local production. This could hamper
local technological development and mean fewer jobs in the local drug industry. It is difficult
to measure the long-term impact of technology transfer. However, the just over 19 000 jobs
(Industrial Development Corporation, 1998) in the domestic pharmaceutical industry cannot
be protected at the expense of the millions of lives being lost and negatively affected by
6.6 Sin taxes
A tax is regarded as progressive if the rich bear a higher burden relative to income than the
poor do. It is considered regressive if the poor bear a higher burden relative to income than
the rich. Table 10 shows the percentage of income spent on excise tax by households with
different incomes. The first decile is the poorest 10% of households, while the tenth decile is
the richest 10%. The tables show that excise tax is strongly regressive (Simkins and Woolard,
2000:35). For example, the poorest households spend 0,8% of their income on excise taxes
while the richest spend 0,2%. The poorest households contribute 3% of excise revenue,
whereas they account for a much, much smaller percentage of total expenditure and income.
Table 10: Incidence of Excise Tax by decile, 1997
1 2 3 4 5 6 7 8 9 10
Selected specific excise duties 62 69 95 125 153 183 207 262 353 486
Selected specific excise duties as 0.8% 0.8% 0.7% 0.7% 0.7% 0.6% 0.5% 0.5% 0.4% 0.2%
% of income
Share of specific excise duties 3.1% 3.5% 4.8% 6.3% 7.7% 9.2% 10.4% 13.1% 17.7% 24.4%
Men consume more alcohol and tobacco products than woman. Table 11 shows that alcohol
consumption as a percentage of household income decreases as the percentage of women in
the household increases. For example, in households with no adult women, or where fewer
than 10% are women, 0,26% of expenditure goes on alcohol, while less than 0,04% goes on
alcohol in households with no adult men. Women also take more responsibility than men for
family health care, including care for illnesses that result from the use of alcohol and tobacco.
In addition, alcohol aggravates domestic and other violence. So it is could be argued that
increases in ‘sin taxes’ are favourable for women.
Table 11: Alcohol expenditure by the presence of adult women in the household
Adult women as % of all adults in the household Expenditure on alcohol as % of total expenditure
0-10% women (usually no women) 0,26%
10-19% women 0,13%
20-59% women 0,10%
60-69% women 0,09%
70-79% women 0,08%
80-89% women 0,07%
90-99% women No cases reported
100% women 0,04%
Note: Calculation based on Statistics SA’s Income and Expenditure Survey, 1995
However, the reason why sin taxes are a useful form of taxation is that the demand for goods
such as alcohol and tobacco is ‘inelastic’. This means that even if the price goes up by a large
amount, people who use the products tend not to buy less. For poor people an increase in the
price will probably mean that there is less money in the household budget for other things.
Woman usually take more responsibility for the household budget than men, so less money
will create stress for them. And it is often mothers who do without when there is not enough,
in order to provide for their children.
Table 5 shows that excise duties contribute about one-sixth of customs and excise revenue.
The Economics of Tobacco Control Project at the University of Cape Town has estimated that
increasing tax levels on cigarettes from 41,6% to 50 percent would give the government an
extra R300 million to spend (http://news.hst.org.za/view.php3?id-20000720). Another way of
increasing revenue is to expand the range of goods on which sin taxes are paid to include
currently illegal drugs rather than just alcohol and tobacco. Supporters of this approach argue
that legalisation of commonly used recreational drugs like marijuana would allow for excise
duties to be paid and challenge the current tax-free “earthly paradise for pushers” (Business
Day, 10 December 1998) The additional revenue raised could be used to fund improvements
in the public health system of benefit to women.
Customs is responsible for gathering information on imports and exports. Information is
usually collected by the smallest category, the six or more digit tariff heading. This
information is generally not collated in a useful form. A special request must be made for
information covering a group of tariff headings, for example on revenue earned on a section
of the harmonised system. Customs charges users in government and the private sector for
collating any information not readily available. For revenue figures by section of the
harmonised system the charge was R100 per year.
Customs figures are also criticised for their lack of policy orientation. For example, revisions
to trade figures are simply added or subtracted to the most recent month, rather than being
assigned to the month for which the revision is made (Business Day, 1 October 1997) As a
result, trade patterns are not accurately reflected, and it is even more difficult for policy
makers and stakeholders to read trends and make links to important issues like employment.
7 Conclusions and recommendations
While trade may have positive and negative outcomes, it appears that women in South Africa
are bearing the brunt of the negative impacts of trade policy and implementation. This is
particularly so for the employment impact of tariff reduction and free trade agreements.
The following recommendations suggest ways in which the ability of the customs service to
protect the economy can be improved:
• Develop information systems in customs and excise that are compatible with the need for
employment impact assessments.
• Develop capacity in DTI to complete employment impact analyses of trade agreements,
and to do this with a gender perspective.
• Include labour representatives in trade agreement negotiating teams.
• Allocate resources to monitor the impact of specific trade agreements, such as the EU/SA
trade agreement, and use safeguard measures where a large part of an industry is being
destroyed and jobs, especially women’s jobs, are being lost.
• Ensure customs monitors particularly sensitive product groups, for example processed
foods from the EU that benefit from non-tariff barriers in that region.
• Increase customs inspections on goods to assist industries that are vulnerable to illegal
imports like clothing, textile and footwear.
• Develop capacity to institute anti-dumping measures in sectors which are important
employers of women such as clothing, agriculture and food processing.
• Train customs staff in identification and valuation of goods, and dealing with SADC rules
of origin requirements.
• Exclude goods produced in EPZs from lower tariffs offered in trade agreements.
• Include a social clause in all trade agreements, incorporating the core ILO conventions.
• Support (by government) of consumer campaigns that encourage fair trade and support
basic labour standards.
At the same time, government needs to ensure it compensates for revenues lost due to the
lowering of tariffs over time so that it can deliver the full range of necessary services to
citizens. The following can be explored further as ways of increasing the revenue contribution
of the excise collection service in a way that benefits women:
• the impact on poor women of increasing sin taxes and taxes on luxury goods as a
proportion of government revenue.
• the taxing of marijuana as a way to increase government revenue.
BTT Board on Tariffs and Trade
CAP Common Agricultural Policy
COSATU Congress of South African Trade Unions
DTI Department of Trade and Industry
EPZ Export Processing Zone
EU European Union
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GEIS General Export Incentive Scheme
ICFTU International Confederation of Trade Unions
IDC Industrial Development Corporation
ILO International Labour Organisation
ISIC International Standard Industrial Classification
NAFTA North American Free Trade Area
NEDLAC National Economic Development and Labour Council
NEF National Economic Forum
SACTWU Southern African Clothing and Textile Workers’ Union
SACU Southern African Customs Union
SADC Southern African Development Community
TRIMS Trade Related Investment Measures
TRIPS Trade Related Intellectual Property Rights
UN United Nations
WHO World Health Organisation
WTO World Trade Organisation
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