ChromeSA says proposed export tax not bode well for local producers
2020-11-04 11:18:17 [Print]
Industry organization ChromeSA says the proposed chrome ore export tax would have a devastating impact on primary and upper group two (UG2) chrome producers, given that they sell the bulk of their production for export.
Cabinet earlier this month approved measures to support the domestic ferrochrome industry, including through an export tax on chrome ore.
"It is clear that insufficient thought has been given to the financial consequences of such a tax and its inevitable impact on direct and indirect jobs, associated industries such as transport and logistics and on communities," states the organization.
Of further concern to ChromeSA is that there is "no clear benefit to the ferrochrome producers themselves from the proposed tax. "Any suggested benefits would, at best, be short term and would be rapidly eroded by the significant negative impact South Africa's ever-increasing electricity tariffs continue to have on local beneficiation," it states.
The organization is calling for a comprehensive and transparent engagement process with all affected parties before the proposal is developed any further.
The organization explains that international chrome ore producers have excess capacity which can replace South Africa chrome ore in sufficient volumes to cause harm to local chrome ore producers.
Apart from South African chrome ore producers not being in a position to simply pass on the tax to Chinese ferrochrome producers, China also has various credible responses available to it to protect its ferrochrome sector.
Additionally, only about 50% of South African ferrochrome exports – those to China and Indonesia – would potentially benefit from the tax. Sales of South African ferrochrome into all other international markets compete primarily against international ferrochrome producers who have their own sources of chrome ore and therefore would be largely unaffected by the tax.
Lastly, rising South African electricity prices, the true cause of the ferrochrome producers' lack of competitiveness, will erode any potential benefit gained within a few years.
South Africa's integrated ferrochrome producers themselves export significant volumes of chrome ore, so any export tax would have a material negative impact on them as well.
ChromeSA and its constituent companies say they are open to all necessary engagements, and to assisting in finding a sector-wide solution, but not at the expense of the future of its employees, communities and investments.
Cabinet earlier this month approved measures to support the domestic ferrochrome industry, including through an export tax on chrome ore.
"It is clear that insufficient thought has been given to the financial consequences of such a tax and its inevitable impact on direct and indirect jobs, associated industries such as transport and logistics and on communities," states the organization.
Of further concern to ChromeSA is that there is "no clear benefit to the ferrochrome producers themselves from the proposed tax. "Any suggested benefits would, at best, be short term and would be rapidly eroded by the significant negative impact South Africa's ever-increasing electricity tariffs continue to have on local beneficiation," it states.
The organization is calling for a comprehensive and transparent engagement process with all affected parties before the proposal is developed any further.
The organization explains that international chrome ore producers have excess capacity which can replace South Africa chrome ore in sufficient volumes to cause harm to local chrome ore producers.
Apart from South African chrome ore producers not being in a position to simply pass on the tax to Chinese ferrochrome producers, China also has various credible responses available to it to protect its ferrochrome sector.
Additionally, only about 50% of South African ferrochrome exports – those to China and Indonesia – would potentially benefit from the tax. Sales of South African ferrochrome into all other international markets compete primarily against international ferrochrome producers who have their own sources of chrome ore and therefore would be largely unaffected by the tax.
Lastly, rising South African electricity prices, the true cause of the ferrochrome producers' lack of competitiveness, will erode any potential benefit gained within a few years.
South Africa's integrated ferrochrome producers themselves export significant volumes of chrome ore, so any export tax would have a material negative impact on them as well.
ChromeSA and its constituent companies say they are open to all necessary engagements, and to assisting in finding a sector-wide solution, but not at the expense of the future of its employees, communities and investments.
