Subscribe
  • Home
  • /
  • Business
  • /
  • SA can earn R10bn if it joins ICT tariffs agreement

SA can earn R10bn if it joins ICT tariffs agreement

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 24 May 2017
The ITA eliminates tariffs on hundreds of ICT products for its 82 signatory countries.
The ITA eliminates tariffs on hundreds of ICT products for its 82 signatory countries.

If SA joins the Information Technology Agreement (ITA), its economy would be $770 million (R10 billion) larger in the 10th year than it would be otherwise, amounting to an additional 0.17% growth.

This is according to a new economic analysis by the Information Technology and Innovation Foundation (ITIF).

ITIF, a global tech-policy think tank, also found SA would raise new tax revenue, recovering 92% of the government's lost tariff revenue in the 10th year - making this a win-win economic policy.

Established in 1996, the international ITA eliminates tariffs on hundreds of ICT products for its 82 signatory countries.

The ITA covers a large number of high-tech products, including computers, telecommunication equipment, semiconductors, semiconductor manufacturing and testing equipment, software, scientific instruments, as well as most of the parts and accessories of these products. It accounts for approximately 97% of world trade in ICT products.

The ITA says reducing their costs leads to increased use of ICT goods, which spurs productivity and economic growth in signatory nations, while deepening their enterprises' participation in global value chains for the production of ICT goods and services.

Big importer

According to StatsSA, SA has consistently imported more ICT products than it has exported. The trade deficit for ICT has grown since 2011, from R42 billion in 2011 to R97 billion in 2014.

It adds that almost half of ICT imports (47.5%) consist of radio, television and communication equipment, and 30.7% consist of office and computing machinery. This highlights SA's reliance on other countries to provide it with ICT equipment, such as smartphones, tablets, computers and servers.

"Increasing the use of technology in all sectors of the economy is one of the most important drivers of economic growth in developing countries because it enhances productivity, spurs innovation and bolsters living standards," says Stephen Ezell, ITIF's vice-president and the report's lead author.

He says the organisation has tried to organise meetings with the South African Embassy in Washington, DC, but so far it has not responded to the invitation.

"We've met with staff from dozens of embassies in Washington, DC. We've met with the trade delegations of dozens of countries to the World Trade Organisation in Geneva. This is the fourth report we've written documenting the positive economic impact of countries joining the ITA."

ITWeb contacted the Department of Trade and Industry, which said issues relating to embassies were handled by the Department of International Relations and Cooperation (DIRCO).

Clayton Monyela, spokesperson of DIRCO, said ITA, as an international organisation, must write to the government first rather than doing it via embassies. "In SA, there is a government department that is responsible for ICT and telecoms [the Department of Postal and Telecommunications Services] - that will be their entry point.

"They must follow procedure and write to the department that is relevant to that area of work. That department has experts and already knows which organisations SA belongs to and why. They will then interrogate what that organisation [ITA] will be able to offer and see if it aligns with SA's own vision and objectives," said Monyela.

Global value chains

ITA's Ezell says if SA joins the body, its businesses and consumers will use more technology products because of lower prices, while becoming more deeply integrated in global value chains for ICT production. "This will spur significant economic growth for the country while generating new tax revenues that substantially offset tariff losses."

ITA says despite the economic benefits, some developing nations have yet to join because their governments are concerned about the loss of operating income from forgone tariffs.

Disproving this false narrative, ITIF says it analysed how the increase in ICT imports and lower prices due to tariff elimination under the ITA would spur greater economic growth and tax revenue in six developing countries: SA, Argentina, Cambodia, Chile, Kenya and Pakistan.

ITIF says joining the ITA would bolster Argentina's economic growth by an estimated 1.52%, or $12.7 billion in additional output, in the 10th year; Cambodia's by 0.98% or $320 million; Chile's by 0.23% or $920 million; Kenya's by 1.29% or $1.4 billion; Pakistan's by 1.30% or $4.6 billion; and SA's by 0.17% or $770 million.

According to ITIF, Chile and SA realise lower, yet still positive, economic impact, because these countries already have relatively low tariff rates on ITA-covered ICT products.

It adds that in the 10th year after joining the ITA, new tax revenues would allow Argentina to recover 133% of forgone tariff revenues ($1.3 billion); Cambodia 23% ($24 million); Chile 67% ($94 million), Kenya 109% ($139 million); Pakistan 75% ($231 million); and SA 92% ($152 million).

ITA accession matters not only to companies in a country's ICT goods- and services-producing sectors, but to all enterprises and industries that leverage ICT and use them to digitise their businesses and operations.

"Countries that haven't joined the ITA are missing a significant opportunity for economic growth, innovation and prosperity," says Ezell. "Joining the ITA makes countries more attractive locations for ICT goods and services producers and exporters, and sends a strong signal that these countries are open for business."

Share