Subsidies for imports?

[Blurock]

Does an importer of cheap solar water heater devices have an unfair advantage over local manufacturers as they both receive the same subsidy from ESKOM?

This is an extract from an article by Brindaveni Naidoo that appeared in Engineering News on 11/11/11:

"Regulatory constraints, costs and cheap imports are putting strain on local solar water heater (SWH) manufacturers in South Africa, the Sustainable Energy Society of Southern Africa (Sessa) ambassador Irvan Damon said on Friday.

Local SWH manufacturers say they struggle to survive under the Eskom rebate programme, and that it has attracted new entrants to the market, mainly importers, without stimulating demand in the same way.
The difficult operating environment has already led to the closure of the SWH manufacturing facility of Western Cape-based Solardome South Africa. The company was established in 1969, and will now retrench 21 employees.

Solardome MD Tertius Lindenberg said imported products had flooded the market, and believed not enough was being done to protect local manufacturers and ensure a competitive local industry. He said the demand for SWH in South Africa did not justify the costs absorbed by manufacturers. Another Western Cape-based manufacturer, SolarMax, MD Jacques van Dyk also warned that his business would have to close its manufacturing facility next year, if conditions did not improve.

A manufacturer can pay between R70 000 and R100 000 to have a system (solar water heater and the geyser) tested by the South African Bureau of Standards to qualify for the current Eskom rebate programme.
Should any components to a system change, the entire system had to be tested and not just the added component/s, Lindenberg lamented. This also restricted businesses from diversifying their product portfolios, as companies did not have the money to pay for any configurations to products, Van Dyk added.

Damon said smaller SWH companies that purely established their businesses’ bottom line on the premise of the Eskom rebate system would find it difficult to survive. Demand remained low and the market could only absorb 50 low-pressure SWH a month, he said, adding that large SWH companies with the capacity to produce up to 10 000 units a month, were now only producing one-tenth of this amount.

Manufacturers are advocating for the Eskom rebate to be offered only to local manufacturers’ products and not for imported products.

What is your view? Should importers, who do not provide local jobs, enjoy the same subsidies?

[AndyD]

They make it sound like the playing field isn't level but foreign imports are already penalised by import duty whereas local suppliers aren't.

I would also be interested to know what percentage of a local product is actually imported parts before commenting on the question. IE are the local manufacturers actually manufacturing or are they just assembling.

Finally a machine isn't just a box of components, how it performs is down to the relationship and interactions between these components during its operation. If you change a single component on a machine it can have far reaching effects on its ability to perform and its safety for the user. I agree that any modifications to the original spec would require a complete SABS retest of the full system, not just of the modified component.

[Justloadit]

What bothers me more is where does the import duty got to?
As with any tax, it lands up in the government coffers and gets wasted somewhere, doing absolutely nothing to improve the industry it is supposed to protect.

Now, using the import duty of the specific field in question, taking the fund and placing it into a slush fund, open for manufacturers to loan against at no interest to improve their facilities in order to compete, or even subsidize, would be a far better use of the import duty. But as with any governmental fund, it will be abused!.

[Blurock]

Good ideas guys. I agree that any SABS or in this case NRCS certified product has to be resubmitted for testing if you change any components. That is why manufacturers must do their R&D before submitting to the SABS.

There are certain products that can not be economically manufactured in South Africa. In that case it is not such a bad idea to have it assembled locally. Just don't try to put the "made in South Africa" mark on it. The textile companies went down the drain because of this. Local retailers were announcing that they are buying local, but sent their buyers with the supplier to procure products in China.