South Africa rejects 20% tariff on imported paper products

SOUTH AFRICA – The International Trade Administration Commission has declined to implement a 20% tariff on imported paper products following an investigation into the domestic industry, disappointing manufacturers who had sought protection against cheaper foreign supply.

The investigation was initially prompted by Mondi, a paper manufacturer with a large footprint in South Africa. 

The company alleged that South Africa’s paper industry was under threat from cheaper international imports, which could harm domestic operations. 

Calls for an investigation were echoed by Sappi, another manufacturer in the country’s paper industry, after it reported a R2.77 billion (US$154.4 million) loss in its last financial year.

Sappi said profitability continued to be impacted by intense competition from low-priced imports, which placed significant pressure on selling prices.

Minister Cited Strain Across Paper and Packaging Segments

Calls from these major industry players prompted Parks Tau, Minister of Trade, Industry and Competition, to request an investigation from the commission. 

The request noted that the South African pulp and paper industry was under tremendous strain, particularly in the uncoated paper, newsprint, packaging and tissue segments. 

It stated that the sector had raised concerns about growing challenges of rising import penetration, declining demand for print paper and the slowdown in the domestic economy.

The request also observed that increasing input costs, particularly electricity and transportation expenses, were placing significant pressure on local manufacturers and squeezing profit margins.

Industry Investment Exceeds US$1.84 Billion Over Seven Years

Paper manufacturing is a major industry in South Africa, with the Department of Trade, Industry and Competition previously estimating that R33 billion (US$1.84 billion) has been invested in it over the past seven years. 

The decision to forgo tariffs leaves domestic producers exposed to continued import competition, particularly from lower-cost producers in Asia and Europe, where energy and logistics costs are more favourable.

Sappi Leadership Warns of Policy Pressure

Steve Binnie, chief executive of Sappi, said South Africa remained a strong business with competitive assets and healthy demand in several markets. 

He added, however, that increasing levels of imported products continued to create challenges for local manufacturers and deserved greater policy attention. 

The commission’s decision means packaging converters and paper buyers will retain access to imported supply at current duty levels, though domestic producers may face continued margin pressure. 

The outcome also leaves open the question of whether alternative measures, such as import surveillance or trade remedy investigations, will be pursued in place of tariffs.

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