Manufacturers and insurers go head-to-head on doubled windscreen tariffs
01 April 2013 | Magazine Archives FAnews & FAnuus | Features / Profiles | Fiona Zerbst, FAnews
From Monday to Thursday each week FAnews published an e-newsletter dealing with news and events relevant to stakeholders in the financial services industry. Our readers are intimately involved with financial services products, compliance and advice and have strong views on issues that affect them … The Best of FAnews.co.za is a magazine feature in which we highlight a popular newsletter published online in the past 60 days. We rehash the core argument presented in the newsletter before considering some of the views raised via our reader comments.
The burning issue
This month’s most popular piece dealt with the issue of increased tariffs on imported windscreens. The International Trade Administration Commission (ITAC) increased the import duty from 15% to 30% in February as part of an initiative to lend tariff support to domestic producers that complain that imports threaten their business.
We chatted to SAIA’s motoring manager Viviene Pearson and Stewart Jennings, CEO of PG Group, which manufactures, distributes and sells windscreens under the trade name Shatterprufe.
Jennings argued that unfair imports are making it impossible for local manufacturers to compete. "The Chinese are exporting unemployment – their prices are subsidized to the point at which their prices are below raw material cost and there is no way we can compete with that,” says Jennings.
Pearson argued that competition is good for the market and the first concern of insurers is to keep costs low so that premiums are affordable. The insurance market receives about 500 000 claims for windscreens a year and Pearson says consumers should be able to choose what they are willing to pay to replace these.
Readers weigh in
Our readers feel that, although local business needs a helping hand, consumers should be free to choose.
"Local production needs incentives to produce more cost-effectively,” says Johann.
"Competition should be welcomed in any free and fair business environment, but because we seem to prefer to legislate people out of poverty in the country, rather than using the usual means like education, strict financial management of your balance sheet, cost containment and so on we will be in this situation for ever,” argues Alan.
Ayanda says: "A nation doesn’t prosper by paying more for goods than it needs to. What it saves by buying less expensive clothing, food, tyres and windscreens it can spend on better education, healthcare and housing. It can also save more for retirement and create more investment. It is false economy to suggest that by buying more expensive goods our nation will be better off. This would be like standing in a bucket and trying to lift oneself up by the handle.”
No easy solution
There is no easy solution to this conundrum. Pearson feels that consumers will vote with their feet and do not have to pay more to help local manufacturers operate at a profit. Stewart’s argument is that jobs will be lost if local manufacturers are forced to close down, which is undoubtedly true, but is the consumer obliged to support them for this reason?
Pearson – and readers – have suggested that manufacturers relook their business models to become profitable. The ITAC is certainly behind the drive to improve the domestic windscreen industry’s competitiveness so that it can achieve economies of scale.
The other issue is quality. Pearson has pointed out that quality is obviously a key concern, but when two windscreens of equally good quality are on offer, the consumer will most likely choose the cheaper of the two.
A final thought
Perhaps government subsidisation would go a long way towards levelling the playing fields so manufacturers could compete with their counterparts overseas. Government could be doing a lot more to assist local manufacturers instead of promoting them in the most roundabout of ways by putting up the price of Chinese imports. Doing business in South Africa remains a significant challenge, especially when the economic pie starts to shrink and there is really not enough pie to keep everyone well fed.
