Q&A with Donald MacKay: Tariff System 'Sliding into Crisis' as Private Sector Walks Away from ITAC

The highly critical 8th Import Duty Investigation Report by XA Global Trade Advisors, released in May 2026, highlights a severe administrative crisis within South Africa’s tariff system. According to XA’s CEO, Donald MacKay, the system is "sliding into crisis", resulting in a massive trust deficit where the private sector is actively walking away from using trade policy instruments.

Chamber: Your data shows that private-sector participation in tariff instruments has essentially flatlined. For Cape Chamber members who are struggling under intense import pressures, what are they actually doing instead? Are they absorbing these costs, cutting their local manufacturing footprints, or transitioning entirely into importing finished goods?

Donald MacKay: The instruments haven't flatlined... they’ve done much worse than that. Their use by the private sector has fallen to its lowest level in 23 years, with only a single application in the last six months of last year, and so it is problematic. These instruments had a fair amount of use in the past. Companies would either need to bring in a raw material that attracted a duty, or you couldn't get the product locally and you’d get duty relief or needed protection. The fact that it has dropped from all sides tells me that the problem isn't that there are only companies asking for lowered protection. This tells me the problem appears to be systemic. We are going to have to see how that plays out. It is possible that this is an anomaly and soon things return to normal, but certainly this is not a good sign...

Chamber: If businesses are actively 'walking away' from the tariff system because they've lost faith in its turnaround times, what does this tell us about the future of South Africa's industrialisation and localisation policies? Is the sluggish bureaucracy of ITAC inadvertently forcing a de-industrialisation of the Western Cape?

Donald MacKay: They've been an utter failure since they were first announced. We had our first industrial policy action plan in 2007. The country has pretty much de-industrialised since then. There’s no way to look at this and say those policies have delivered anything to date.

It wouldn't be fair to lay all of this problem on the shoulders of ITAC.

From an ITAC perspective, what has shifted here is that these policies were driven from the bottom up: a company or a sector would face a particular problem and go to the government for a concession. What is happening here is the other way around: government is actively attempting to identify the winning industries—which sectors deserve saving and which do not. And so rather than this being a bottom-up process, it now appears to have become considerably more top-down, at least in the thinking.

Chamber: Cape manufacturers often have to import highly specialised components or raw materials because they simply aren't made locally. Why is the government forcing companies to sign restrictive hiring, investment, or pricing agreements just to get relief from a tariff they shouldn't have been paying in the first place? Is this just bureaucratic blindness or could there be some other agenda at play?

Donald MacKay: It’s confusing. To my mind there isn’t an upside to this. I can’t imagine any company or the economy that is better off having these agreements. Why they are there, I struggle to tell you. If I had to hazard a guess, it is that many of the lofty ideals government has had—reduce inequality, bring down poverty, get rid of unemployment—these things are not happening, and so this is viewed as a shortcut. You are not creating enough jobs, so we are going to force you to create jobs... I think that is the sort of thinking.

Chamber: Because these reciprocal agreements are entirely confidential, you’ve noted that it's impossible to objectively measure if they yield any actual economic benefit. Do you think this secrecy creates a system of 'winners and losers' where politically connected businesses or massive local monopolies can negotiate better terms than mid-sized regional manufacturers?

Donald MacKay: The problem becomes considerably worse at that point. Two issues here. The one is that nobody knows what goes into these agreements. In what world can you ever assess if the agreement is generating a positive outcome?

The second part of the problem is that it is inconsistently applied. It took us an eternity to get the data out of ITAC, but eventually we did. Now we can see that about 65% of the time you have to sign an agreement, but the other 35% of the time you do not. We have no idea what creates that distinction. Clearly this thing is not consistently applied, and that introduces an even greater level of uncertainty into the process.

Chamber: Presumably the reliance on permit-controlled rebates instead of clean tariff removals affects a company’s ability to confidently pitch for international contracts or draft a 5-year capital investment plan when their raw material costs are at the mercy of an unpredictable, permit-based system?

Donald MacKay: Yes, absolutely. This is the biggest challenge you have. On one hand government is endlessly talking about cutting red tape... for some reason they don't see all of these permits as red tape. Two distinct problems arise with the permit. The one is that you may not get it. You may plan to have it and then for whatever reason you don't get it. 

The other problem is connected to the slow pace of things... you get the permit but it takes six months longer than anticipated to get, at which point the permit has lost all value. If you are going to have permits—and I'm strongly against using permits for this type of purpose—there has to be a time constraint... if not rejected then it needs to be automatically issuing. The way this works is you effectively have not removed the duties for a chunk of the people.

Chamber: The report mentions that ITAC plans to tie these rebate permits to B-BBEE codes of practice, which has nothing to do with whether a product is physically available in South Africa. Surely there could be grounds for a review should ITAC implement this plan?

Donald MacKay: We don't know how practically this will get implemented yet. It doesn't tell us how this will be implemented. If this were to be implemented, it would be disastrous.

We could have one company that can't get a permit and one that can... both will have the same problem. You will have fronting. We've seen this before. When the permits were allowed to give relief on anti-dumping duties on chicken... the traditional importers couldn't suddenly halve their import volume.

It is not as if people are just going to give up on their businesses. The other issue is that if B-BBEE becomes a consideration, then we are no longer dealing with a product’s availability.

Chamber: If you were advising a Cape Chamber member today who is currently caught in a multi-year ITAC backlog, what practical steps should they take?

Donald MacKay: I think there is value in putting together a lobby to deal with this. There are other associations that are interested as well. I think it would be in everybody’s interest. Getting this predictability in benefits you no matter which side of the argument you are on. We are not arguing for more protection or less protection; we are just saying give us a more predictable process.