SA International borders and service delivery

TIPED UKZNSeptember 13th, 2018

Scope of South African international borders

Source: Map supplied by Customs Working Group; Port # supplied by Revenue planningNote: 1. Customs only present at designated ports of entry where commercial and passenger traffic can flow; 2. Customs offices in PTA & JHB have also have an Excise office present

Airport (13)

Port of Entry (27) (Designated1)

Seaport (11)

Port of Entry (32) (Non-Designated)

Customs Office2 (10)Borderline = 4862 km

Sea Line = 2798km

OR TAMBO Hub International airport

Durban hub, sea port & International airport

The Changing Trade Landscape - complicating service

3

DRIVERS DESCRIPTION

Increasing Trade Rules, Volume and Complexity

- BREXIT, USA - WTO TFA- Proliferation of regional trade agreements (COMESA-EAC-SADC)

New Business Models and Requirements

- LPI 2016: SA No 20- Just-in-time distribution (speed and cost)- Increase in express shipments (e-commerce)- E-commerce and disruption

Increasing Security Threats and Organised Crime

- 2016: Brussels, Istanbul etc.- WCO Punta Cana Security Resolution, 2015- Supply chains abuse by terrorist groups and organised crime- Rhino, lion- CITIES and environmental obligations- Targeting of strategic assets

New approach to the Border - New measures emerging for end-to-end management of movement of goods across borders (such as WCO SAFE), coordinated Border Mgt (BMA)

Demands from Society - Protection from dangerous and prohibited goods

New trading patterns - Increase trade amongst connected parties (>50% of world trade)

Increasing Revenue Fraud - Increased threats of duty and tax evasion, profit shifting & avoidance

Economic Growth & development

- Expedite exports, increase competitiveness of domestic manufacturers and promote & support African trade development

Service delivery – in a trade context

4

• Support global supply chains & Just in time business models

• Auditable processes – focused on visible compliance rather than expensive physical controls and stops

• Fastest End to end process• Cheapest end to end process• Predictable and consistent• Simple processes

Business needs State needs

• Revenue collection• Compliance• Protect society: drugs• Protect fair competition• and intellectual property• Meet SABS Standards• Health and Safety issues • Control prohibited and restricted goods • Ensure national Security• Protect Environmental laws

• Risk based, fully integrated, harmonised global business model

• Efficient and aligned supply chains –with logistics providers source to market

SA international trade changes: 2006 to 2016

5

Note: All numbers are approximate

SA Customs

Registered users for electronic data interchange

Number of declarations received electronically

% electronic submissions to total declaration

Value of declarations processed electronically

Payments processed electronically

% electronic payments to total revenue

2006

1117

1.9m

38%

R514bn

R52bn

77%

2016

4036

5.8m

99%

R2.67Trillion

R166bn

94%

Source: SARS annual reports

Customs service delivery requirements result in continual change over 30+ years

1980+• Automation for

imports.• Manual capture

of exports.

2000 +• Customs

Transformation Programme (SIYAKHA).

• Implementation of EDI for customs clearance processing.

• Introduced Anti-smuggling teams

2003+• Implementation of

Customs first automated risk engine (ICRAS).

• Established the Customs Border Control Unit (CBCU).

• Customs Green Paper.

• Port of Durban - first port to sign up with the US Container Security Initiative.

2009+• Implemented SARS

Enterprise Risk Management System.

• Service Manager –Customs case management and inspection tool.

• New Customs Tariff engine.

• New automated Cargo Management solution.

2012 +• Rollout of

modernised systems and procedures at Customs Ports With the business community.

• Customs-2-Customs Data Exchange with Mozambique and Swaziland (GNC)

• Deployment of additional X-Ray Scanning facilities

Gate Keeper Approach Risk Management Approach

Paper driven procedures Automated paperless processing

2016+• Automated manifest

risk management

• New Customs Act • Rollout of

modernised systems and procedures to support Act

• One Stop border posts

• Customs-2-Customs Connectivity Data Exchange with

Ideal Global supply chains - WCO SAFE and security

Customs Exit Port

Transit Custom

Entry Port Customs Economic OperatorsEconomic Operators

ORIGIN DESTINATION

TRANSIT LEGEXPORT LEG IMPORT LEG

National AEO Programme –

Exporting Country

CUSTOMS 2 CUSTOMSExchange of Information,

Mutual Recognition & Cooperation

National PT / AEO Programme –

importing Country

SAFE Pillar 2 (AEO) SAFE Pillar 1 (C2C) SAFE Pillar 2 (AEO)

SAFE Pillar 3 (C2G)Coordinated border management

Single window

Customs strategic focus – across the whole supply chain

RiskGoods control prior to arrival / departure

Audit

Facilitation of low-risk goods: Fast, predictable service to support RSA economy

Revenue coverage of known commercial traders

Protect society from safety and security threats / P&R

Inspection

Critical Success factors

4. Quality Inspection of commercial documents

5. Physical Inspection

6. Audit capability

3. Customs Risk Management - What to release vs. Stop?- Feedback loop to improve risk

1. Right information to control goods- Cargo & supply chain: - 3rd party, OGA, C2C matching

2. Right information to collect revenue:- Customs Declaration:

Mandatary Value

Revenue coverage of unknown / high risk trade

SARS Philosophy: Intelligence-driven risk management

Value-Adding Activities

Registration Declaration Assessment Inspection Audit

Reso

urce

Dis

trib

utio

n

Current resource distribution

Post Modernisationresource distribution

Accreditation / Entity assuranceaudits

Removing mandatory checks

Periodic declarations & Simplifications

Entity based performance audits (systems & process)

InspectionProactive client management

Automated processing through integrated risk assessment

Compliance audits (customs regimes)

Customs 7 core initiatives required to improve the processes within the integrated supply approach

Register Cargo Control Declare Assess Inspect Enforce Release Audit

New Act

-Manifests-Registration / licensing -Declaration processing

ProfessionalOrganisation

- Customs competency- Customs uniforms- Reporting & performance- CTL training- Modernise & align Excise

Risk and Intelligence Management

Customs Risk Management

- Risk strategy & SOPs- Inspection quality- Workflow tools- CRE & C3P design

GoodsControl

- Goods control Pilots- Command centre- Goods tracking system- State Warehouses- National Drug Plan

Commercial Compliance

- Preferred Trader - Audit capacity- Revenue projects

Governance

-Stakeholder Forum -Reporting and performance improvement -Internal audit

Infrastructure

-Facilities plan-Detector Dog Unit-Scanners-State warehouse upgrade

Service orientated development focus - Customs

• Develop revised inspection model to embed quality, with SOPs and working instructions

• Develop Customs risk engine specifications

• Design and implement National Targeting Centre

• Single Window, with DAFF and whole of government..

• New integrated border management agency

• One Stop Borders- SARS - Mozambique / One stop Inter-departmental agreement Share electronic data

• Customs to Customs data and connectivity capabilities

Service orientated development focus – Logistics / SOEs

• Seamless Port capacity (no queuing, quick berthing)

• Efficient and effective Port facilities – container, bulk, break-bulk)

• Warehousing and consolidation

• Rapid shifts in modality (sea, land, airport - to train, truck, plane, to warehouse, to end customers)

• Express and postal services

• Regional alignment – South Africa as a service to Africa

• Development zones and tax and development incentives

• Seamless and highly productive management systems

RSA business competitiveness requires all the parties to play togetherCurrently costs are rising and effectiveness declining

How can we improve service? What, where, who measures it?

• SARS

• Transnet- Port

- Rail

• Border Agency / Cross border agencies?

• Warehouse providers

• Carriers

• Road Hauliers

International Trade Facilitation Agreement – ratified and official commitment end 2017 New National trade facilitation committee - DTI and SARS joint committee

Independent measures – competitiveness - WEF

• World Bank – Ease of doing business

• World Economic Forum - measuring competitiveness among countries since 1979• defines economic competitiveness as “the set of institutions, policies and factors

that determine the level of productivity of a country”. • All measures focus on “productivity”.

• A competitive economy, is a productive one. And productivity leads to growth, which leads to income levels and improved well-being.

• “rising competitiveness means rising prosperity. World Economic Forum, we believe that competitive economies are those that are most likely to be able to grow more sustainably and inclusively, meaning more likelihood that everyone in society will benefit from the fruits of economic growth”.

Independent measures – competitiveness - WEF

• World Economic Forum - measuring competitiveness among countries since 1979• defines economic competitiveness as “the set of institutions, policies and factors

that determine the level of productivity of a country”. • All measures focus on “productivity”.

• A competitive economy, is a productive one. And productivity leads to growth, which leads to income levels and improved well-being.

• “rising competitiveness means rising prosperity. World Economic Forum, we believe that competitive economies are those that are most likely to be able to grow more sustainably and inclusively, meaning more likelihood that everyone in society will benefit from the fruits of economic growth”.

• WEF competitiveness has 12 distinct areas, grouped into three sub-indexes. • “basic requirements” which comprise institutions, infrastructure, macroeconomic

environment and health and primary education. • “efficiency enhancers” sub-index of markets functioning for goods, labour or financial

including higher education and training, and technological readiness, which measures how well economies are prepared for the transition into more advanced, knowledge-based economies.

• “innovation and sophistication”:, Ability to draw on world-class businesses and research establishments, as well as an innovative, supportive government.

RSA international competitiveness has been falling

“We note decreasing competitiveness in Institutions, Macro-economic environment, Goods and market efficiency, and Financial market development. Meaning that both government and the private sector should take heed of the deteriorating competitiveness indicators.”“The country improved Labour market efficiency to 93rd /137, Infrastructure to 61st and Health & Primary education to 121st.” Dr Kingsley Makhubela: CEO Brand SA:

World Bank Ease of doing business

• World Economic Forum - measuring competitiveness among countries since 1979• defines economic competitiveness as “the set of institutions, policies and factors

that determine the level of productivity of a country”. • All measures focus on “productivity”.

• A competitive economy, is a productive one. And productivity leads to growth, which leads to income levels and improved well-being.

• “rising competitiveness means rising prosperity. World Economic Forum, we believe that competitive economies are those that are most likely to be able to grow more sustainably and inclusively, meaning more likelihood that everyone in society will benefit from the fruits of economic growth”.

• WEF competitiveness has 12 distinct areas, grouped into three sub-indexes. • “basic requirements” which comprise institutions, infrastructure, macroeconomic

environment and health and primary education. • “efficiency enhancers” sub-index of markets functioning for goods, labour or financial

including higher education and training, and technological readiness, which measures how well economies are prepared for the transition into more advanced, knowledge-based economies.

• “innovation and sophistication”:, Ability to draw on world-class businesses and research establishments, as well as an innovative, supportive government.

RSA competitiveness has been falling in Ease of doing business (World Bank)

18

The World Bank Ease of doing business index ranks 197 countries against each other based on how the regulatory environment is conducive to business operation. Economies with a high rank have simpler and more friendly regulations for businesses

RSA was ranked 147th in trading across borders

RSA Trading across borders performance card:

19

IndicatorSouth Africa

Sub-Saharan Africa

OECD high income

Overall Best Performer

Time to export: Border compliance (hours)

100 100.1 12.7 0 (17 Economies)

Cost to export: Border compliance (USD)

428 592.1 149.9 0.00 (19 Economies)

Time to export: Documentary compliance (hours)

68 87.8 2.41.0 (25

Economies)

Cost to export: Documentary compliance (USD)

170 215.1 35.40.00 (19

Economies)

Time to import: Border compliance (hours) 144 136.4 8.7

0.00 (21 Economies)

Cost to import: Border compliance (USD)

657 686.8 111.6 0.00 (27 Economies)

Time to import: Documentary compliance (hours)

36 103.0 3.51.0 (30

Economies)

Cost to import: Documentary compliance (USD)

213 300.1 25.6 0.00 (30 economies)

Source: www.doingbusiness.org/data/explore