Mpahlwa+vows+to+end+import+parity+pricing,+B.+Day

Business Day, Johannesburg, 28 June 2005
=Mpahlwa vows to end import parity pricing=


 * Siseko Njobeni, Trade and Industry Correspondent**

TRADE and Industry Minister Mandisi Mpahlwa said yesterday that government would “fast-track” the elimination of import parity pricing, saying the system made South African products inaccessible.

His statement is the latest indication of government’s displeasure with the system, under which companies set their local selling price at the international price with the addition of costs such as freight, insurance and harbour charges.

Speaking at a press conference in Pretoria yesterday, Mpahlwa said: “There is a locking out of opportunities that we believe are there.”

Manufacturers and companies such as car makers reliant on steel and other materials will be pleased to see the end of a system, which Mpahlwa said earlier this year inflated prices as much as 50%.

Manufacturers say the system tends to inflate the prices they have to pay for their input costs.

This hinders growth in the value-added industries such as metals and chemicals, which the country needs to develop to lessen a reliance on the export of raw materials.

Mpahlwa said the elimination of the system was one government intervention to stimulate growth in the kinds of manufacturing industries that would create jobs. The removal of import parity pricing alone would not be enough to stimulate the local manufacturers, however. The minister said government would come up with incentives to encourage their growth and create job opportunities.

Mittal Steel SA is one company that has come under heavy criticism for its use of the pricing policy.

Mining companies DRDGOLD and Harmony earlier this year complained to the Competition Tribunal about the steel maker’s prices, which they said were unreasonably high.

Mittal Steel spokesman Thami Didiza said yesterday that the scrapping of the system would not affect the company at all. “We have moved away from it,” he said.

Didiza said the company was in discussions with government on the development of its pricing methodology.

As part of its agreement to buy Iscor, Mittal Steel (formerly LNM) agreed last year to implement a pricing model more favourable to local steel purchasers.

Yesterday’s press conference was part of government’s briefing on its different clusters.

Mpahlwa was speaking on behalf of the economic, investment and employment cluster.

He said the South African economy was in a “higher growth range” than before.

The reduced fiscal deficit, falling interest rates and inflation, as well as a high level of business confidence, had enabled growth to remain resilient in the face of slower global economic growth.

State-owned enterprises would play a critical role in accelerating growth, he said.

Electrical utility Eskom and transport giant Transnet planned major investment drives, which Mpahlwa said would help improve the country’s infrastructure. Transnet and Eskom plan to spend R40bn and R95bn respectively in the next five years.

“A priority is the implementation of an appropriate regulatory framework to stimulate new state-owned enterprise investment in infrastructure,” Mpahlwa said.

The government also wanted to see reduced cost structures and increased competition, he said.

“Government intends sending a strong message … that there must be increased competition to promote growth of downstream and value-adding economic activity.”

An integrated small business strategy will be handed to cabinet for approval next month.

Spending on research and development has increased from 0,76% in 2002 to 0,81% last year, Mpahlwa said. SA is edging closer to its target of spending 1% of gross domestic product on research and development by 2008.


 * From: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A61420