According to the ITAC report, AMRAS is the only known manufacturer of mainline rail products in the Southern African Customs Union (SACU) region. The company operates a rail manufacturing facility in Emalahleni, Mpumalanga, which it acquired and revived in 2022.
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The International Trade Administration Commission of South Africa (ITAC) has recommended that the general rate of customs duty on imported rails be increased from 5% to 10% ad valorem, a move aimed at supporting domestic rail manufacturing and strengthening South Africa’s steel value chain.
The recommendation is contained in the latest ITAC report, which considered an application by ArcelorMittal Rail and Structures (AMRAS), a division of ArcelorMittal South Africa (AMSA).
AMRAS requested that the tariff on rails be raised to the World Trade Organization-bound rate of 10%.
One of the reasons AMRAS gave for the duty increase application was that their rail production plant was operating at significantly low capacity and that import replacement would enable the company to reach sustainable operating levels, reduce marginal cost of production and enhance overall competitiveness.
According to the ITAC report, AMRAS is the only known manufacturer of mainline rail products in the Southern African Customs Union (SACU) region. The company operates a rail manufacturing facility in Emalahleni, Mpumalanga, which it acquired and revived in 2022.
“In 2022, AMSA launched the production of mainline rail at its newly acquired AMRAS facility in Emalahleni. The acquisition signals the revival of local mainline rail manufacturing capability, making AMRAS the sole producer of mainline rail in sub-Saharan Africa,” the report states.
ITAC said rail products are critical for transportation infrastructure and are used extensively in railway networks, mining operations and industrial logistics. The commission noted that the local rail manufacturing industry faces significant challenges, including rising production costs and weak capacity utilisation.
“The continuing difficult global and domestic operating environment in the entire steel value chain… is affecting investment decisions and further constraining possibilities for employment creation,” the commission said.
The report highlighted that while AMRAS has sufficient installed capacity to meet domestic demand, the plant is operating well below its potential. The company argued that greater protection against imports would help improve production volumes, lower unit costs and enhance competitiveness.
Among the motivations submitted by the applicant was the need to replace imported steel products with locally manufactured alternatives. The company said products required for railway infrastructure development can now be sourced locally, helping to stimulate economic activity and support the domestic steel industry.
“The plant is currently operating at significantly low capacity. Therefore, import replacement will enable the company to reach sustainable operating levels, reduce marginal cost of production and enhance overall competitiveness,” the report noted.
ITAC found that most rail imports into South Africa originate from the European Union and the Far East. The commission also noted that the African Continental Free Trade Agreement presents opportunities for South African manufacturers to strengthen their position as suppliers of rail products across the continent.
The application received support from Zak Steel, which argued that additional tariff protection would help local manufacturing while rebate provisions could be used for specialised rail products that are not produced domestically.
After reviewing the application and comments received, ITAC concluded that tariff support was justified.
“The Commission concluded that the requested tariff support should enable the domestic industry manufacturing the subject product to utilise its existing under-utilised production capacity, achieve economies of scale, resulting in increased volumes with a reduction in the marginal cost of production,” the report states.
The commission subsequently recommended that the general rate of customs duty on rails be increased from 5% ad valorem to 10% ad valorem.
In addition, ITAC proposed that the tariff increase should not be permanent without review.
The commission recommended that “the proposed duty on the subject product be reviewed after a period of 3 years following its implementation” to assess the performance of the domestic industry and determine whether the measure continues to be warranted.
If approved, the higher tariff is expected to provide additional support to South Africa’s rail manufacturing sector while advancing government efforts to promote localisation, industrialisation and the objectives of the South African Steel and Metal Fabrication Master Plan.
BUSINESS REPORT