‘MIDP has been a mixed blessing’

A drain on overall trade balance ED RICHARDSON SOUTH AFRICA’S Motor Industry Development Programme (MIDP) has boosted the local vehicle manufacturing industry but has not necessarily benefited the overall trade balance, says ABSA in its 2006 review of South Africa’s foreign trade. “Since its introduction in 1995, the MIDP seems to have had a positive impact on the number of light motor vehicle units exported from South Africa to the rest of the world,” says the report. These rose from R1 914 million in 1998 to R20 397 million in 2005. However, the benefit of the MIDP for the overall trade balance is “somewhat mixed,” it adds. The light motor vehicle segment was a drain on South Africa’s trade account in 1998, and more recently from 2004 to 2005. The total value of light motor vehicle imports into South Africa rose from R2 631 million in 1998 to R24 027 million by 2005. Importation of fully built up vehicles has been made price competitive by a combination of a reduction of tariffs and credits earned through the export of vehicles and components which can be used to offset import taxes. “That said, over the period from 1999 to 2003, this segment of the market made a positive contribution to the country’s foreign exchange earnings,” adds the report. Nevertheless, the overall economic cost arguments against the MIDP, as well as the fact that this programme can be argued to be anti-competitive under the WTO rules, cannot be ignored, it says. Some of these issues seem likely to be addressed during the third review of the MIDP