Are SMMEs disadvantaged by 'big business' focus?

Government’s trade and industry policies are biased towards big business players and often fail to take into account the needs of the smaller producers. That’s the view of Azar Jammine, director and chief economist at Econometrix, commenting on the news last week that two vehicle manufacturers – Nissan and General Motors – had been granted temporary exemptions from the minimum annual production threshold of 50 000 units in the Automotive Production and Development Programme (APDP). Jammine told FTW that he believed the minimum annual threshold in the APDP programme could disadvantage smaller vehicle manufacturers. “It’s these kinds of exemptions that tend to open the way for abuse at the expense of others and lend themselves to bribery and corruption,” he said. He noted that the APDP programme had potentially left the smaller producers out in the cold in government’s attempts to be seen engaging with bigger business players. “For government’s industrialisation policies to work, it needs to level the playing field a little,” Jammine commented. Under the APDP programme, motor manufacturers that fail to achieve the annual production volume requirement will lose the volume assembly allowance (VAA) – a support mechanism in the form of duty-free import credits issued to qualifying vehicle assemblers. The granting of temporary exemptions from the annual production threshold to these two manufacturers follows the gazetting of an amendment to the APDP regulations by the Department of Economic Development in June last year. Ford South Africa’s national communications manager, Alisea Chetty, issued this statement to FTW after a call for comment on Jammine’s statement: “The APDP significantly benefits South Africa – from job creation to increased local content via localisation initiatives. Having seven automotive manufacturers in South Africa producing vehicles is a testament to the success of the auto policy that the South African government has developed.” She added: “The APDP programme is a reflection of the South African government’s long-term commitment to the auto sector. As the global environment is continuously changing, the APDP programme provides a platform for South Africa to compete and win new business.” Another manufacturer told FTW that the automotive manufacturing sector was still not “up to strength” in South Africa, commenting that he welcomed any incentive the government could provide in an increasingly uncertain production environment. “The metals and engineering sector has been struggling for more than five years owing to fierce import competition from Asian economies, industrial action, increasing production costs and power outages, among other factors,” said Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist, Henk Langenhoven. INSERT & CAPTION For government’s industrialisation policies to work, it needs to level the playing field a little. – Azar Jarmine