Johannesburg - South Africa’s policy for the growth and development of the motor industry was not a sustainable model, the motor industry trade warned on Wednesday.
If the government did not understand this, the industry would go the same way as the industry had in Australia, said Ken Lello, the chief operating officer for listed Metair Investments’ South African operations, at a workshop at the Automechanika trade fair on Wednesday.
Ford, GM Holden and Toyota in 2013 confirmed the closure by 2017 of their manufacturing operations in Australia, which is expected to result in more than 30 000 job losses.
Lello said one of the reasons the Australian automotive industry was dying was because the government did not support the industry and reduced the duty rate on imported vehicles to 5 percent.
He said import tariffs under the Motor Industry Development Programme (MIDP) and its successor, the Automotive Production and Development Programme (APDP), had levelled out at 25 percent on vehicles and 20 percent on components.
He said everybody believed there was protection for the industry but original equipment manufacturers (OEMs) were able to rebate this duty.
“The net duty rate paid today in the industry is very comparable to Australia. We are going down the same road as Australia because we take the protection of the industry away through the offset of these duties.
BUILDING LESS, IMPORTING MORE
“We are starting to import more and more vehicles into South Africa. So effectively we have become a vehicle importer rather than a vehicle manufacturer because the strategies of a lot of the OEMs in South Africa sit around the importation of vehicles.
“The only (competitive) edge we have is that in order to import vehicles, you get duty rebates and that requires some form of localisation. That forces OEMs to produce vehicles in South Africa.
“That is not a sustainable model. It is just driven by policy,” he said.
He said the MIDP and APDP looked like a success story because, for instance, capital expenditure had risen from R847 million in 1995 to R4.7 billion in 2012 while the value of vehicles and components exports rose from R4.2bn to R86.9bn and total vehicles exported had grown from 15 764 to 277 893 units.
Lello did not believe any of the major objectives of the APDP would be achieved.
He said there was a need to understand the successes and downfalls of the APDP, accept the need for change, understand and learn from other countries that had been successful and review the industry support structures in South Africa to ensure they achieved their objectives.
APDP DELAY COULD COST SA BUSINESS
South Africa would most probably lose business because of the delay in the finalisation of the Automotive Production and Development Programme (APDP) review.
Robert Houdet, the executive director of the National Association of Automotive Component and Allied Manufacturers (Naacam), said on Wednesday that original equipment manufacturers (OEMs) and component manufacturers needed policy certainty to enable them to make decisions soon.
The outcome of the APDP review needed to be announced soon, Houdet said at an APDP workshop organised by Naacam at the Automechanika trade fair. Houdet said the Department of Trade and Industry (dti) had planned to do a presentation at the workshop on the APDP but Roger Pitot, the advisor on the APDP review to the dti, had declined because the results of the APDP had not yet been finalised, which “is very unfortunate”.
Pitot expressed confidence in October that the government would be able to make an announcement on the APDP review by the end of the year and told Business Report last week the announcement was expected this month.
Houdet said the more the results of the APDP review were delayed, the more decisions by OEMs and components manufacturers would not be forthcoming and “most probably South Africa will be losing business”. “The South African automotive industry represents about 0.5 percent of the total world’s production of vehicles. We are nothing. The world doesn’t need South Africa.
“But if we work hard, we are committed, we bring (policy) certainty, we sort out labour instability and we keep doing things right, the world cannot ignore South Africa,” he said.
Ken Lello, the chief operating officer for Metair Investments’ South African operations, said it was not only important for the results of the APDP review to be announced as soon as possible but for changes to the APDP post-2020 to be finalised within the next 18 to 24 months.
Lello stressed that OEMs and component manufacturers needed time to adapt their strategies to changes in automotive policy.
Business Report