/ 2 February 1996

Wind up to excise duties

South African import duties are preventing the sounds of music from reaching the man in the street, reports Jacquie Golding-Duffy

The South African company which manufactures wind-up radios has appealed to Deputy President Thabo Mbeki to lift crippling import costs which have scuppered local sales. Cape Town-based BayGen Power Manufacturing, which launched the radio last October, targeting South Africa’s rural poor, said ad valorem tax on import costs of the radio’s components put its selling price beyond the reach of the local market. The wind-up radio, a `godsend to cost-effective communications in poverty-stricken areas’, has proved to be the opposite with a crippling 37,5% ad valorem on radio components forcing the price to be pushed up by the same percentage, the company said. Baygen sales and marketing manager Leigh Murray said about 10,000 radios had been sold abroad but not one radio had been sold locally. `Because of taxes imposed on the sale of goods locally, we would have to up the price to cover costs and this in turn will not make the product, in this case radios, affordable to the man on the street,’ Murray said. The Baylis generator, a British invention which powers the radio, was developed into a South African venture with funding from, among others, the British Overseas Development Administration, Liberty Life and Kagiso Trust Investment (the business arm of Kagiso Trust). But shareholders have yet to reap the benefits of their investment and rural expectations have yet to be met with the supposedly cheap transistor because the ad valorem — a form of excise duty levied on the sale of certain domestic products, like the wind-up radio — are increasing factory manufacturing costs. BayGen Power secured exclusive rights to manufacture, market, distribute and sell products generated by the Baylis generator.

BayGen financial manager Brian Barrett said the company had given distribution rights to Windup Technologies and the latter was responsible for selling the radios. `Windup Technologies have not sold any radios but orders for next month had been agreed on in principle,’ Barrett

He said the onus was on the distributor to `find ways and means of getting around the excise duty by convincing government to lift it’. BayGen general manager John Hutchinson confirmed that no radios had been sold locally. He said the problem with local sales was that the radios were seen by government as `luxury items’ rather than necessities. The excise duty tax would have to be slapped on to the factory price which in turn directly affected consumer prices. Hutchinson said the base in Cape Town was responsible for meeting international as well as local demands, but a labour force of 100 workers was unable to meet the annual target of 500 000 units. `We are producing about 10 000 to 20 000 units in Cape Town,’ he said, but added that the majority of radios manufactured thus far had been for overseas buyers and consumers in Africa. He was reluctant to reveal the cost of manufacturing the radios but said all profits, which at the moment were non-existent, would go to various shareholders, among others, the Disability Employment Concerns, which contributes 30% of the workforce at the BayGen factory. `Profits will go back to shareholders proportionate to their shareholding,’ he said. Windup Technologies, the distributing company, said informal talks with government were being followed up with a written application to have the tax lifted. Its financial director, Clive Ferreira, said the radio would cost about R300 and that buyers would save at least R200 annually on batteries. `We’re limited by the production available to us and will not be able to meet all demands but we are intending, together with local black businessmen, to set up a chain of stores to sell the radio in the Gauteng metropolitan area,’ Ferreira said. He said many influential businessmen were being approached in a bid to get sales going in various local regions but stressed that the tax issue would have to be sorted out first. `Local interest has been very slow but I have no doubt that it will be a success, given time,’ he said.

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