Port Elizabeth - Some of the proposals in the government's new automotive development policy, which will replace the current Automotive Production and Development Programme from 2020, are “a violent departure” from the existing policy, says Ford.
Ford Middle East and Africa president Jacques Brent said: “I definitely get the idea that it's not going to be business as usual.”
Brent said one of the proposals was not to scrap the export credits on vehicles made in South Africa but to increase the local content threshold of these vehicles in order for them to qualify for an export credit. This will make it more difficult for vehicle manufacturers to earn export credits, which can be used to offset the import duty on fully built-up vehicle models that were imported to be sold in the domestic market.
Brent was speaking on the sidelines of a function in Port Elizabeth, where Ford reported that it had more than doubled the capacity of its Struandale engine plant as part of its R3 billion investment in production in South Africa. He said the current APDP was export-biased, whereas the proposed programme had a more local bias.
Compromise
However, Brent expected that there would be a compromise and that the new programme would be more neutral.
“Not everybody is going to be happy," he said, "but I hope it is going to be as much a win-win as possible.”
Brent said that vehicle manufacturers needed to get “payback on their investments”, and if the policy changed, all the financial metrics that were used to evaluate a particular programme were impacted. There needed to be a fine balance in the export credit requirements, he added, and he understood the government's quid pro quo.
“You need people to invest," he said, "to get the local content, and you need to create the employment, otherwise why is the government paying all this money in incentives. I don’t think it’s going to be a case of the pendulum swinging violently left or right, but who knows?”
Successor to X3 in danger
Oliver Zipse, management board member responsible for production at BMW and chairman of BMW South Africa, cautioned earlier that the proposed changes to the automotive policy would endanger the growth and future of the industry. He said if the export credit incentive were removed, it would endanger the successor to the BMW X3 at the group’s plant in Rosslyn in Pretoria.
He added that BMW had recently invested R6.2 billion in South Africa, its biggest investment in the country in 50 years, and it was necessary to maintain the current policy or it would endanger its use of that investment.
Engineering News reported that Brent confirmed a decision on where to produce the next-generation Ranger pick-up was “imminent”. South Africa is one of three global production sites for the Ranger, and about 65 percent of the domestic production of this model is exported.
Brent told Engineering News it was not a question of whether the next-generation Ranger would be built in South Africa, but what the production volume would be, which would depend on the content of the new automotive support programme.