Welcome to the Age of Enduring Zombie Tariffs

The recent Import Duty Investigation Report by XA Global Advisors reveals that nearly 94% of tariffs enforced by the International Trade Administration Commission of South Africa (Itac) have not been reviewed in the past 20 years.

Once implemented, import duties are seldom repealed, continuing to shield businesses that fall under the 3,607 tariff codes inclusive of these duties.

“In practice, they are perpetual,” remarks Donald MacKay, CEO of XA Global Advisors.

Read: Confusion and panic over proposed steel tariff increases

This reality incurs a substantial financial burden: South Africans bore a remarkable R108 billion in duties from July 2024 to June 2025, with almost 94% of these tariffs last reviewed before 2005.

At the report’s unveiling this week, MacKay stressed the importance of including termination dates in any subsidies or duties granted. While Itac had previously committed to reviewing duties every three to five years, that promise is no longer being kept.

“However, the existence of an industry doesn’t necessitate indefinite duty protection. Companies shielded from competition for too long can become uncompetitive. This explains why monopolies struggle significantly when competition emerges.

“Indefinite duties create a stagnant economy that fails to adapt to swift global changes,” warns the report.

“The primary beneficiaries of tariff increases typically aren’t nimble, emerging firms; instead, they tend to be older, cumbersome organizations that find it difficult to thrive in a modern market.”

Duties frequently remain in effect even when local manufacturers are non-existent—often as a precaution should a local producer decide to start manufacturing.

Years-long Investigations

At present, tariff investigations at Itac average 27 months to conclude, much longer than the targeted six months.

For most of the last 22 years, investigations were concluded within six to twelve months, although one investigation extended beyond five years.

Firms encountering import competition can request a duty increase from Itac, a process that typically should not take longer than six months once interested parties respond and Itac presents its recommendations to the Minister of Trade, Industry, and Competition. The recommendation is subsequently forwarded to the Minister of Finance, and upon approval, the SA Revenue Service (Sars) is responsible for implementing the duty change.

However, by 2023, investigations were averaging around 23 months at Itac, with a slight reduction to 18 months anticipated by June 2025.

“In the first half of 2025, a larger number of investigations remain open while fewer are concluded compared to the previous six-month period. This trend raises concerns,” the report observes. “Older cases continue to age without resolution.”

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XA Global Advisors calls on Itac to reach definitive conclusions, either approving or denying applications for duty adjustments.

“These investigations affect real people and jobs. It’s time for a decision to be made.”

Winners and Losers

There is a push for greater control across various value chains, driven by the belief that struggling sectors can be revived through a combination of tariffs, rebates, subsidies, and import restrictions, according to MacKay.

“With an emphasis on safeguarding intermediate goods, we risk preserving upstream producers at the cost of labor-intensive downstream sectors.”

A prominent example is the comprehensive review of the steel industry currently taking place, involving R52 billion in imports across 460 tariff codes and impacting 16,319 traders.

Read: Tariff lifeline for ArcelorMittal means higher prices for customers

Concerns arise that Itac may implement emergency measures to further raise duties beyond the so-called bound rates established when South Africa became a World Trade Organisation member. There is also the possibility that South Africa—like the US and other nations—might invoke national security to sidestep its General Agreement on Tariffs and Trade (GATT) obligations.

Matthew Stern, director at DNA Economics, comments that the report reveals “alarming and vivid” findings. The system for tariff reviews appears dysfunctional. This doesn’t overlook the complexities in decision-making. There will inherently be winners and losers, necessitating some level of understanding for Itac amid its challenges.”

“However, using a fragmented tariff line approach conveys a misleading message to businesses and lacks strategic intent,” adds Stern.

Another trend identified in the report is the rising issuance of duty rebates instead of abolishing existing duties. These rebates necessitate permits that come with conditions.

In the textiles sector, for instance, applicants need to be members of a bargaining council (which increases labor costs); commit to purchasing specified volumes of locally produced textiles; limit sales to the Southern African Customs Union country where they were produced; and restrict trade to retailers compliant with the Retail Clothing, Textile, Footwear and Leather Masterplan.

This constitutes governmental overreach, and many of these conditions were not present when the rebate was initially introduced.

As the rules for rebate permits are deemed guidelines rather than formal regulations, they can be issued by Itac without ministerial approval.

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Processing permits requires time, adding administrative burdens and costs for businesses utilizing them. Numerous rebates apply to products not produced locally, primarily targeting intermediate goods. When companies struggle to acquire these raw materials affordably, factory operations cease, resulting in job losses.

Itac is now looking to impose import controls on 392 steel tariff codes, encompassing R45 billion in annual imports. This would entail a complete halt on imports without the necessary permit, with Itac suggesting the introduction of a fee for companies to help manage the additional administrative burden associated with permit issuance.

“It’s easy to envisage a situation similar to what we see with Home Affairs, where businesses await permit approvals,” the report notes.

ArcelorMittal SA has filed the highest number of applications for duty increases—12 in a single year, either individually or as part of a group. Over the review period, private sector companies submitted 111 applications for duty increases, with 62% representing one-off requests.

The report presents several recommendations to improve trade efficiency:

• Reassess duties that are overdue for review
• Abolish reciprocal agreements that demand concessions from applicants, as these undermine trust in the system
• Publish a non-confidential version of any reciprocal agreements
• Revise tariff regulations to establish time limits on tariff investigations, implement variable duty trigger changes to accelerate decision-making, mandate Itac to release investigation reports, and ensure a review date for all duty increases.

Read: Tariff decision delay could shutter SA’s R2.5bn roasted groundnut industry

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