Johannesburg - The government’s plans to establish South Africa as the bakkie manufacturing hub for the African continent have hit a snag.
Part of the government’s mooted strategy to establish the hub was to impose a controversial new duty on fully built-up (FBU) imported light commercial vehicles, but this has been thwarted by stiff opposition to the duty by local vehicle manufacturers.
Industry sources said a planned R10 000 a unit ad valorem duty on FBU light commercial vehicles was one of the proposals considered during the review of the Automotive Production and Development Programme (APDP). The APDP replaced the Motor Industry Development Programme (MIDP) on January 1, 2013, and it applies to light vehicles only.
The APDP consists of four pillars to boost local light vehicle production. These are an import duty, two rebates in the form of the vehicle assembly allowance and the production incentive as well as an automotive investment scheme.
Roger Pitot, the advisor on the APDP review to the Department of Trade and Industry, confirmed last week a new ad valorem duty on light commercial vehicles was one of many proposals discussed last year during the APDP review, but he could not comment on whether any proposals were rejected or not.
“OFF THE TABLE”
However, Naamsa director Nico Vermeulen said the proposed new duty on FBU light commercial vehicles was “off the table, because of technical issues”.
But Vermeulen said the proposed drive to make South Africa the bakkie manufacturing hub for Africa would be clarified in terms of the government’s medium- and longer term development plans for the automotive industry when the outcome of the APDP review was announced.
He believed the government would confirm this was its plan for the industry, but would recognise it could not be done in the short term and was something that could possibly be implemented towards the end of the current APDP, which expires in 2020.
“This will give companies sufficient advance notice so strategically they can decide if they want to get into bakkie manufacturing,” he said.
If the new duty was implemented now, it would have been particularly prejudicial to Volkswagen South Africa, which in terms of the current APDP decided to focus on the local manufacture of some passenger car models and import light commercial and other
vehicles.
NO AMENDMENTS
Apart from premium passenger car manufacturers Mercedes-Benz South Africa and BMW South Africa, all the other locally based vehicle manufacturers produce light commercial vehicle models
locally.
Matt Gennrich, the communications general manager at Volkswagen SA, said any comment would be speculative as no amendments to the APDP had been formally announced or published, and Volkswagen SA were regretfully not prepared to do that.
“Once the changes, their effective date, etc, are announced, we will study these and will then be prepared to make a comment,” he said.
Former Volkswagen SA managing director David Powels, who in February took up a new post as president of Volkswagen do Brasil, last year warned government about alarming foreign investors by making too many changes to the APDP.
Another proposal considered during the APDP review, according to industry sources, was a proposed reduction or a relaxation of the 50 000 units a year annual production threshold requirement for locally-based vehicle manufacturers to meet to qualify for incentives and benefits in terms of the APDP.
Pitot confirmed this proposal had also been considered but “whether it’s among the
final recommendations remains to be seen”.
Vermeulen added that another issue that came up for discussion in the APDP review was that it was difficult for a newcomer to the market to immediately achieve the 50 000 unit annual production target.
Vermeulen said the discussion took place on the basis that the production threshold was almost a barrier to entry “because nobody can come into this market and from day one produce 50 000 units a year”.
This required some flexibility on the production threshold, he said.
Business Report