THE SA retail industry involved in high-quality designer label clothes has been struck a crippling blow by a massive duty increase imposed in December, according to Roland Raath, m.d. of Cargocare - a forwarding company specialising in the import of these clothes.
The new tariffs - Gazetted as Amendment No. R2046 on December 13 - were declared as increasing duty on average from 15% to 40%, he said. But a number of the increases, in actuality, were more than 500% - when you take the ad valorem/weight structure of the duties into account. This was confirmed to FTW by Nico Botha of the Bon Ami up-market clothing chain, who highlighted just two of his latest bills of entry (BoE).
In one case, he said, the duty on a consignment of men's cotton shirts had gone from last year's R60 to R350 this year - an increase of 483,3%. One for jerseys went from R313,73 in last February's BoE to R2 112 this month - a rise of 573,2%. These are just two small examples, Botha added, but reach disastrous proportions when you value this sector of the clothing retail industry as a whole.
To guess at the size of import market involved, said Botha, I would estimate that men's clothing of this up-market type totals about R100-million a year. Add in the women's clothing total of about R200m and you are talking about more than R300-m of imports affected by these higher duty levels. Taking the Sandton City shopping centre alone - Botha calculates that about R10-m worth of men's clothes and R20-m of women's will be hit by the increased duty.
This could put as many as 150 retailers out of business as there is no way the market can take such increases in price, he said. A lot of us are busy trying to return goods that have just been priced out of the market by this duty. Others in the same unfortunate position also complaining bitterly about this new tariff structure, according to Raath, include Teatro Alla Scala, Vetho International and Carisma.
It's not as though these retailers could have adjusted their pre-ordering to beat the effects of this new tariff, he added.
These people at this level of the fashion industry place their orders up to a year ahead of this season in South Africa, said Raath. And the Board of Tariffs & Trade have said that they only put out the new duties for comment on November 3. They then quickly impose them on December 13.
This inflicts tremendous hardship on these importers, who have ordered their stocks one season back. Now that the goods have been finally prepared and freighted, the importer finds it near impossible to sell the goods at the new price. Botha, and a number of others in the trade, have already sent letters of complaint to the Board - in the hopes that they may agree to refunding the extra duty on goods that were provably ordered before that November 3 notice was published. The Board agrees that an uproar has been caused in the trade.
Said Coert Grobbelaar: We have submitted cases to the Board where duties on very expensive clothing are being increased. During this telecon with Grobbelaar, a Mrs van der Merwe confirmed in the background that we have had requests and that the application will go before the board. But that meeting was held on Wednesday, February 5, and all attempts to contact either of these parties before print deadline have failed.
It is not even certain that the Board would find in favour of some form of duty refund.
Said Botha: Add the devaluation of the rand to these 300%-500% duty increases and our overall costs have nearly doubled - way beyond what the market can bear. And forward cover is no answer, acording to Botha Cover for over a year is almost the same as the devaluation, he said. You've also got to lay out your money for a whole year - and that's not on. The reasoning behind this massive duty increase, appears from what Grobbelaar told FTW, to be all related to the proposed seven-year phase-back of clothing and textile import duties to within the parameters laid down by the WTO (World Trade Organisation).
It seems to be part of a balancing act where the increased ad valorem duty allows the maximum duty to be reduced - to fall to the applicable WTO level at the end of the seven-year period.
And the local textile and clothing industries, who feel that falling duties would just price their SA- made products out of the market, wanted this maximum duty to be maintained.
Why his retailing sector should suffer because of local manufacturers, Botha just cannot fathom.
There is the odd cross-over, he said, but only a tiny percentage of their top-of-the-range material is affected - maybe 5%.
It seems to me that something has gone wrong in the new tariff headings. Somebody wanted to do something; didn't know how to do it; but did it anyway.
