Media Release: Immediate
This past Friday (10 March 2017), the Southern African Clothing and Textile Workers’ Union (SACTWU) marched to and protested at the Head Office of the South African Revenue Services (SARS) in Brooklyn, Pretoria. The protest – innovative and theatrical (see photos attached) – was intended to demonstrate our extreme unhappiness with the crisis of illegal imports flooding into South Africa (SA), which SARS has stopped effectively policing over the past two years or so.
The consequence of SARS’ declining efforts to halt the flow of illegal imports into SA has been rising job losses and greater instability in the clothing, textile, footwear and leather (CTFL) industry.
The action on Friday 10 March 2017 signaled the beginning of a campaign by SACTWU of rolling protests. In this regard, preparations were well underway to conduct 18 additional different protest actions at SARS’ regional and branch offices around the country, as well as at harbours and other ports of entry, over the period 17 to 31 March 2017. We intended to bring our concerns to SARS’ officials along the length and breadth of the institution.
However, we can now announce we will ‘press pause’ and suspend these further protests. We have received a mandate to suspend our additional protests in order to give the SARS leadership a chance to meet with us on 12 April 2017 and explain to us how they will get ‘back on the wagon’: in other words we will give them an opportunity to agree to concrete and urgent solutions to fight illegal imports again.
SACTWU and other representatives of the CTFL industry have repeatedly raised our concerns about illegal imports with SARS, for more than 18 months now. We have pointed out to them in our quarterly industry forum meetings, that the customs and investigative work by SARS against illegal imports appears to have collapsed in recent years. This is despite the institution having done some very impressive work between 2009 and 2013/14 to fight against the deluge of illegally and fraudulently imported CTFL products. It seems to us that SARS is now choosing illegal importers over local jobs.
This situation is extremely worrying. The SARS customs fraud campaign is a key leg of the State’s drive to reindustrialize South Africa, and the imperative to fight customs fraud is captured in key government economic and industrial policies. If SARS does not do its work properly, it undermines everything else done by other parts of government to build and grow industries and factories.
To date nothing has been done by SARS to correct this problem. This is why SACTWU held its march last Friday, and planned further protests in all provinces.
The collapse of the SARS’ customs fraud campaign should not only concern workers and their unions, or industries and employers. This problem actually has a direct impact on society at large and on our future development as a country. After all, apart from the obvious benefit to having more employment and industry rather than less, when import duties are not collected properly by SARS, this robs the South African fiscus of billions of Rands worth of revenue. We estimate that about R4bn worth of import duties are lost every year from illegally imported clothing and footwear from China alone. If these duties were collected, it could have built infrastructure or helped factories or supported SMMEs or provided bursaries to student or provided grants and services to the poor.
See a copy of our memorandum to SARS on handed over on 10 March 2017 below.
If further information is required kindly contact SACTWU’s Etienne Vlok on cell number 082 4480506 or Simon Eppel on 083 652 3559. Alternatively both can be contacted on office number 021 447 4570
“MEMORANDUM TO THE SOUTH AFRICAN REVENUE SERVICES (SARS):
We are members of SACTWU, representatives of workers from clothing, textile, footwear and leather (CTFL) factories across South Africa. We also represent workers in the industry’s distribution pipeline.
Our members come from the poorest parts of the South African community, with most being women and single mothers.
We are here because our industry and our jobs are under threat from illegal imports, and in our view SARS is not doing enough to stop this crisis. In fact it seems to us that SARS is choosing illegal importers over local jobs. This must change now!
A large proportion of all the clothing, textiles, and footwear products imported into South Africa comes into the country illegally. These illegal imports are an enormous problem. They impact on workers, working class communities, our industries, our economy, and our future development as a country. National Government knows that this is a very serious problem. That is why it has said that we need to combat illegal imports in its economic and industrial policies.
Over the last few years, National Government, working together with our trade union, has introduced support measures which has helped to stabilise our industry. However, these noble efforts are now being undermined by ineffective customs control measures which open the floodgates for high levels of illegal imports into our country.
These illegal imports are being sold all around our country. They are so cheap because they have not paid any, or the full, import duty. As a result our local legally operating factories cannot compete. They lose orders. They close and retrench workers. We lose our jobs. In the process our families and communities become poorer, and our country suffers.
But the problem of illegally imported clothing, textiles and footwear is actually a much bigger problem. It is not only our industry and us as workers who lose.
SARS loses from illegal imports!
Take for example illegal clothing imports from China, the biggest source of all clothing imports. This robs SARS of about R3.3bn in unpaid import duties every year.
In addition there is probably about R600m of unpaid duties from illegal footwear imports from China every year.
On these two items alone - just from one country (China) - SARS is losing almost R4bn worth of import duties every year.
But SARS loses even more because if local factories struggle, then SARS loses the chance to collect VAT from local factory sales. It gets even worse. SARS also loses: the opportunity to collect more company tax and income tax; the opportunity to collect VAT from retail sales because illegally imported clothing, textiles and footwear are often sold within retailers and wholesalers that do not pay VAT; and the opportunity to collect VAT on purchases of other products that workers could have made, but can no longer afford when they lose their jobs.
Government loses from illegal imports!
The government has pumped over R7bn worth of industrial policy incentives and loans into our industry in recent years. This has been done to help our factories to modernise and become competitive. But these incentives are supposed to be supported by a strong campaign by SARS against customs fraud. The problem is that when SARS does not do its job properly, our factories are undermined by illegal imports, and the significant investments made by the government are wasted.
Our economy loses from illegal imports!
When we as workers are made poorer and lose our jobs, it makes other people poorer too. After all, if we lose our incomes, we cannot spend as much money in the economy anymore. If we do not buy as much, other people cannot sell as much: they earn less money, and this makes them poorer.
Our future development loses from illegal imports!
When SARS does not collect duties from illegal imports, it means we cannot fully strengthen our dream of building a better life for all. It reduces the resources available for government to build infrastructure or help factories or support SMMEs or provide bursaries to student or provide grants and services to the poor.
The R4bn in import duties that South Africans lose from illegal Chinese clothing and footwear imports every year could fund an additional 100 000 NSFAS bursaries every year, or build an additional 25 000 RDP houses every year, or provide better childcare grants to over 12.1m beneficiaries or better old age grant payments to 3.2m pensioners.
SACTWU says NO to all this waste!
Today is not the first time we are raising the problem of illegal clothing, textile and footwear imports with SARS. In fact we first did so almost 20 years ago. Finally 8 years ago, in 2009, SARS started a serious campaign to combat illegal imports. In the four years following 2009, SARS confiscated more than R1.9bn of illegally imported clothing and textiles, an average of R485 million per year. The impact was significant and it properly supported government’s other industrial developmental initiatives, such as the incentives and the State’s local procurement drive. As a result and combined with other government supply-side support measures, our factories received more orders, job losses decreased, and our industry began to stabilise.
But then the SARS illegal imports campaign seemed to stop working.
In the last three years, the SARS annual reports declare it only seized R106 million worth of clothing and textiles, an average of R35 million per year. Last year, in 2015/16, we saw the near collapse of this campaign, with only R8.7 million worth of illegally imported clothing confiscated.
During this time we have also seen the collapse of the reference price system which was developed to monitor and apprehend illegal clothing and textiles. The system continues to flag thousands of suspicious consignments yet SARS is no longer sending samples to our industry experts for valuations – which is a key part of the process to fight illegal imports.
In 2014 about 40 to 50 samples of suspicious clothing were sent to industry experts each month for valuations. This dropped to an average of 30 per month in 2015, and plummeted to about 2 per month in 2016.
There have been zero clothing valuations requested this year, so far. For home textiles (bed linen and related items) the last valuation was requested 14 months ago, with only 10 valuations requested in the last two years. Previously 20 to 30 home textile valuations were being requested per month. Fabric valuations have fared even worse: there have been no requests for valuations since December 2014. If no valuations are requested from our industry experts, it means there is no evidence being gathered to help investigate and prosecute offenders.
In other words SARS is no longer tackling customs fraud.
We have repeatedly and over an extended period raised these problems with SARS officials and requested SARS to take action. But nothing has improved.
Billions of Rands worth of illegal clothing are still flooding into the country every year. We know that SARS is tracking thousands of suspicious containers entering the country every year. We suspect that SARS knows which importers and freight forwarders are committing fraud and are illegally importing clothing, textiles and footwear.
But if SARS knows all of this, then why does it not stop this situation? Why is SARS not collecting evidence to investigate the culprits anymore? Why are we not seeing high profile arrests of illegal importers? Why is SARS not charging these culprits with fraud? Why, with an already very high rate of unemployment in our country are more workers being forced, through no fault of them or their employers, to join the unemployed simply because SARS is failing to protect them against illegal imports?
We demand that SARS:
• Revive the reference price system and begin to actively stop illegal imports and build the evidence to fight customs fraud
• Make sure that customs fraud offenders, including high profile offenders, are prosecuted. Justice needs to be done, and an example needs to be made of these offenders to discourage others from doing the same. We recognise that this requires the assistance of the NPA but then plans must be made urgently to allow this to happen
• Evaluate and possibly implement an alternative formula to collect import duties to eliminate the incentive for cheating through under-invoicing
• Implement dedicated ports of entry for clothing, textiles and footwear imports to ensure better monitoring
• Conduct inspections at the port of export for goods destined for South Africa
• Fast-track the implement the new Customs Control and Customs Duty Acts, which contain several provisions to help deal better with customs fraud
• Increase monitoring of compliance with trade agreements, specifically Rules of Origin provisions in regional agreements which allow for duty-free imports
• Increase raids on internal customs fraud hotspots and target the distribution part of the value chain – such as warehouses of retailers and importers, and China malls and other shopping centres
• Use customs reservists and other measures to increase capacity at major ports
• Increase the media profile of SARS’ fight against illegally imported clothing, textiles and footwear
• Introduce targets for SARS - specifically in terms of jobs saved - for its customs fraud campaign
We need to win the fight against customs fraud and industrialise our country. But we cannot do it when SARS does not do its work well enough.
Issued by the SA Clothing and Textile Workers’ Union (SACTWU) on the 10th day of March 2017, at SARS Head Office in Brooklyn, Pretoria”