Vehicle manufacturers Nissan South Africa and General Motors South Africa (GMSA) have been granted temporary exemptions from the minimum annual production threshold of 50 000 units in the Automotive Production and Development Programme (APDP).
The production threshold qualifies locally based motor manufacturers for incentives and benefits in terms of the APDP.
Import credits
Motor manufacturers that fail to achieve the annual production volume requirement lose the volume assembly allowance (VAA), a support mechanism in the form of duty-free import credits issued to qualifying vehicle assemblers.
The granting of temporary exemptions to these two manufacturers from complying with the annual production threshold follows the gazetting of an amendment to the APDP regulations by the Department of Economic Development in June last year.
In terms of the amendment, motor vehicle manufacturers with a plant capacity of 50 000 units a year may submit applications to the International Trade Administration Commission for registration as a specified motor vehicle manufacturer “unless otherwise determined by the minister”.
Tanya van Meelis, the chief economist at the Economic Development Department, confirmed last week that Economic Development Minister Ebrahim Patel had on October 17 exercised this discretion.
Van Meelis said Patel had considered the request from the two motor manufacturers in terms of Section 2.5 to Info Doc B/2013 of the APDP guidelines, which states: “If an OEM (original equipment manufacturer) should experience difficulties in achieving set production volumes due to, for instance, a global economic slowdown, prolonged strike action, etc, it may approach the minister requesting temporary reprieve.”
Economic slump
Van Meelis said Nissan SA and GMSA had experienced declining production volumes due to the economic slump in Europe, resulting in these manufacturers losing significant export volumes and Patel had granted a temporary reprieve to both.
Meelis added that the VAA benefit in the APDP would be calculated based on the volumes produced by the two manufacturers.
“The duration of the temporary dispensation is for the period April 1, 2014 to March 31, 2015 only. For the period under consideration, both OEMs are exempted from any minimum production levels.
“In order to ramp them up to the required production levels, they were deemed to be new entrants, meaning that they would have to achieve a minimum of 12 500 units from the fourth quarter of 2015 onwards,” she said.
Azar Jammine, the chief economist at Econometrix, was opposed to the discretion granted to the Economic Development Minister.
“It’s these kind of exemptions that tend to open the way forward for abuse at the expense of others and lend themselves to bribery and corruption,” he said.
Nissan SA and GMSA declined to answer specific questions about whether they had applied for exemption from the annual production threshold and instead issued a statement.
Duduzile Mwelase, the general manager of corporate communications at Nissan SA, said: “We are currently below the 50 000 threshold for 2015, but are evaluating various opportunities. We have ongoing discussions with all stakeholders as to how the current outlook can be optimised, but are not in a position to disclose any further information at this time.”
Denise van Huyssteen, the communications manager at GMSA, confirmed that the company had approached the government as part of the midterm APDP review process to review the minimum threshold volume requirement of the APDP in the short term.
“We greatly appreciate their support and remain focused on growing our export volumes in the African market,” she said. A longer term manufacturing footprint was currently under development for GMSA, but it was premature at this stage to speculate about which products would form part of its future manufacturing portfolio.
“Our objective remains to grow our locally assembled vehicle production for both the domestic and export markets. This will allow us to continue to contribute towards the local economy, as we have done since 1926,” Van Huyssteen said.
“As we enter the next phase of capital investment, we will be looking to undertake further upgrades to our manufacturing operations and investment in next generation programmes.”