Bitumen import surcharges waived

Petroleum bitumen is a critical material for infrastructure development in the Southern African Customs Union and is primarily used in road construction where it acts as the glue or binder, mixed with aggregate particles to create asphalt. It is a by-product of crude oil. SA has four refineries that produce bitumen.

Itac chief commissioner Siyabulela Tsengiwe said last week the shortage in the domestic market had led to price increases the local market.

The Competition Commission has investigated a bitumen cartel that was active from 2000 to 2009 after receiving an application for corporate leniency from Sasol, through its subsidiary Tosas.

Last year Engen and Shell reached settlement agreements with the commission over allegations of involvement in the cartel.

Engen had agreed to pay an administrative penalty of R28m and Shell R26.3m. The commission had already reached settlements with Masana and the Southern Africa Bitumen Association (Sabita).

Masana paid a fine of R13m and Sabita paid R500,000.

Engen and Shell admitted to having fixed the price of bitumen with other oil companies by agreeing on pricing principles, including a starting reference price and monthly price adjustment mechanism.

Itac said imports had increased from 152,646kg in 2009 to 4,979,243kg in 2011 and 16,465,517kg between January and November last year. The value of imports had rose from R1.4bn in 2009 to R24bn in 2011 and R76bn for the first 11 months of last year.

Tsengiwe said Itac has decided to implement a permit system, rather than a straight reduction of the 10% ad valorem duty imposed on the import of bitumen. The rebate waiver will be in place for three years and the data that will be recorded over the period will be used when considering a review of the waiver.

He said the system would not cause any delays for importers, but would allow Itac to "carefully monitor the supply and demand conditions" as well as the depth and size of the industry. The application was brought by Colas SA, a manufacturer and applicator of bituminous binders and slurries for road surfacing.

Rebates are a pillar of certain industrial development programmes, such as that for the motor vehicle and component industry, Itac said. The four local refineries, Enref, Sapref, Chevron and Natref, have not objected to the application.

"As bitumen is a vital material for infrastructure development, the commission found that the importation of bitumen, over and above the 10% import tariff, has significant cost implications as it requires expensive specialised equipment and storage facilities," Tsengiwe said.

Companies that wanted to import bitumen will not be limited to a specific amount as the permit is merely intended to keep track of imports over the waiver period, Itac said.

Source: Business Day via I-Net Bridge