Gaborone - Hyundai, Botswana's biggest export to the Southern African Customs Union (Sacu) market, has taken over from Toyota as the leading motoring manufacturer in the CSI national sales survey.
This should be good news for Botswana. Instead, some Botswana government officials and Hyundai managers are preparing for the worst. The growth in Hyundai vehicle sales could trigger another bout in the running mini trade war between Botswana and South Africa.
The two neighbours have been locked in a cold war since Hyundai started assembling semi knocked down (SKD) car kits in Gaborone.
Kitso Mokaila, the general manager of Hyundai Motor Distributors, said Hyundai had made a significant impact on the balance of trade between South Africa and Botswana since 1992, with the trend continuing as Hyundai increased its exports to South Africa.
Reinhard Kunstler, the chief executive officer of Wheels of Africa, last week reported Hyundai sales figures for February of 1 207, an increase of 13 percent over January. Vehicle exports have overtaken beef as the biggest foreign currency earner after diamonds.
This is in spite of quota restrictions imposed by South Africa three years ago on the sale of SKD cars assembled in Sacu member states. The restriction allows Hyundai to sell 1 000 cars to the Sacu market at 20 percent customs duty. Any car sold in excess of the quota is levied at 100 percent duty.
Hyundai is rejecting the quota restriction outright. The South Korean car manufacturer argues that when it opened an SKD assembly plant here, with a promise to graduate to assembling completely knocked down kits, the understanding was that South Africa would monitor the transition and review the quota restrictions as stipulated in its Board of Trade and Tariffs guidelines. This did not happen and the quota remained at 1 000 until recently, when Botswana unilaterally decided to increase the quota by 250.
However, this did not go far enough to please Hyundai. The vehicle maker maintains that it has to sell at least 2 000 cars to break even. Hyundai has thus decided to pay 20 percent for all its exports to Sacu and is putting pressure on the government to push South Africa to review the quota.
"We are not refusing to pay the customs duty. All we are asking is that the government should ask South Africa to review the quota and tell us what the quota would be if South Africa had kept to the agreement to review the quota every six months," said Mokaila.
At the same time Hyundai is accumulating millions of pula in contingent liabilities, which should be going into Sacu coffers.
This has angered vehicle manufacturing lobby groups in South Africa, the National Union of Metal Workers of South Africa (Numsa) and Hyundai workers in Botswana.
Numsa has charged that the South Korean car manufacturer has flouted import regulations and evading duty payments in its use of Botswana and Namibia to gain access to South Africa and the regional markets.
Numsa's call for an investigation on Hyundai was backed by Hyundai workers in Botswana, who face retrenchment when the company closes its SKD plant sometime this year and switches to assembling completely knocked down units.
Hyundai workers have complained that the company was importing cars from South Korea through Maputo in an almost completely built up state to justify the planned retrenchment.