Concerns allayed over reduction in auto incentives

The National Association of
Automobile Manufacturers
of South Africa (Naamsa)
does not believe that there
is any intention to reduce
current incentives for vehicle
manufacturers, despite recent
fears expressed by global
manufacturers invested in
South Africa.
“On the contrary, the
Department of Trade and
Industry (dti) has confirmed
its commitment to support
the SA automotive industry in
expanding its global footprint
to levels approximating 1% of
global new vehicle production
from the 2015 level of 0.68%
of global vehicle output,” said
Nico Vermeulen, a director of
Naamsa.
South Africa produced
609 500 vehicles in 2015 –
up 9% from a year earlier,
according to Vermeulen. He
was reacting to a statement
by Volkswagen South Africa
MD, Thomas Schäfer,
who pointed to “recent
discussions” with government
officials who were reportedly
exploring the option of
diverting resources from the
Automotive Production and
Development Programme
(APDP) to other projects.
According to Schäfer, only
about 0.6% of the world’s
automotive production takes
place locally. “There are many
challenges, including high
labour and logistics costs and
the fact that South Africa is
located further away from
many export markets in
comparison to other emerging
markets that are focused
on automotive production.
Without the APDP, we are not
cost-competitive.
“If the incentives went
away, it would be the
immediate end of the motor
industry in South Africa,”
Schäfer noted, saying many
global players would exit the
country.
The announcement by
Minister of Finance, Pravin
Gordhan, during his midterm
budget statement late
last month of a review of
government incentives – to
be completed by October next
year – further compounded
fears.
“Given increased pressures
on the fiscus, these incentives,
including direct transfers,
tax and tariff rebates, and
concessional financing, are
being reviewed,” Gordhan
said in the statement but this
was “nothing extraordinary”,
according to Vermeulen.
National Treasury
periodically undertakes
reviews to determine whether
the incentives provided
are consistent with official
performance expectations
and targets for different
sectors.
“The review is intended
to assess performance,
determine value for money,
and analyse how the system
as a whole supports the
economy and job creation,” he
pointed out.
The dti had not responded
to calls for comment by the
time of going to print but
Vermeulen pointed out that it
was currently in consultation
with industry stakeholders
– including vehicle
manufacturers, importers
and distributors, the
component manufacturing
industry and the trade
unions – on its 2020-2035
automotive developmental
policy framework.
Earlier this year, Minister
of Trade and Industry Dr
Rob Davies affirmed his
department’s commitment
to increasing sector-specific
incentives, including the
automotive industry,
highlighting the success of
the APDP in driving jobs and
export growth.
CAPTION
An imported vehicle arrives at the roll-on roll-off terminal at
the port of Durban. Photo: Transnet Port Terminals