Johannesburg - Discussions are to commence this year on a new incentive programme for the motor industry to replace the Automotive Production and Development Programme (APDP) when it expires in 2020.
But Trade and Industry Minister Rob Davies said he was not in a position to comment on the duration of the new programme and its content, because the deliberations had not yet commenced.
Davies also did not know if the discussions about the new programme would be completed this year.
“It does not involve a complete redesign of the APDP, but an improvement on what has been working quite well. The sooner we start, the sooner we will finish it,” he said.
There were reports last month that the new programme would be finalised this year and extend until 2035.
Davies said work on the new programme would start now, because quite a few of the potential new investments in the motor industry extended beyond the expiry of the APDP in 2020.
The new programme would not be drastically different from the APDP, despite the dissatisfaction of component manufacturers in the recent review of this programme.
The government was aware that about a quarter of investment per job was required in the automotive component industry compared with the automotive manufacturing industry, which meant deepening localisation through more component manufacturing did create more jobs.
To strike a balance
But Davies stressed that those jobs would not be created if there were not any original equipment manufacturers (OEMs). It was, therefore, important to strike a balance between the interests of component manufacturers and OEMs, he said.
Davies added that the new programme would be similar “in identifiable respects” to the APDP, but the details would have to be worked out and would emerge from the consultation process.
One of the major changes to the APDP in the recent review was to replace the 50 000 units annual production threshold with a sliding scale of production volumes and incentives.
Davies said many investors had indicated that they could get to 50 000 units of production a year, but needed a few years to ramp up to that volume. This meant the trade and industry department had to decide case-by-case “whether we crack them some slack or not”, and the sliding scale accommodated this, he said.
Davies said there were also projects, such as the planned multi-model vehicle plant project in East London, which would bring in a number of smaller scale manufacturers together in a single factory.
“That would be something catered for by the flexibilities we have introduced,” he said.
The Beijing Automobile International Corporation (BAIC), China’s fifth-largest car manufacturer, announced last year that it would invest R11 billion in a completely knocked down vehicle manufacturing plant in South Africa.
The BAIC is believed to be seriously considering the East London multi-model plant.
Significant numbers
Investments worth more than R25bn had taken place in recent years with several other major investments announced recently. “We are seeing a significant number of OEMs strengthening their presence in South Africa, despite the state of the economy and world economy. There is something seriously beneficial in being in South Africa,” Davies said.
Davies attributed this to several factors, including the certainty around the APDP, the competitive advantages brought about by the devaluation of the rand, the levels of productivity and output and the ability of South African vehicle plants to produce quality motor vehicles.
The Ford Motor Company this week announced a R2.5bn investment in South Africa for the production of the Everest special utility vehicle at its plant in Silverton in Pretoria.
BMW last year announced a R6bn investment in South Africa for the production of the new generation BMW X3, while Volkswagen South Africa committed to investing more than R4.5bn by 2017 to increase the production capacity of its Uitenhage plant by 50 percent.
The automotive industry contributed about 6 percent to the country’s gross domestic product and about 9 percent to exports, Davies said.
BUSINESS REPORT