Cabinet approves new automotive programme

The new APDP, which will replace the Motor Industry Development Programme (MIDP), is expected to stimulate growth in the automotive vehicle production industry to 1.2 million vehicles per annum by 2020 with associated deepening of the components industry.

This will further provide an opportunity to increase the local content of domestically assembled vehicles.

“The revised MIDP would seek to provide industry with a reasonable level of support in a market neutral manner. There would be no discrimination for products sold domestically and those exported,” Department of Trade and Industry Minister Mandisi Mphahlwa said.

Largest manufacturing sector

Automotives is a strategic sector for the South African economy and the largest and leading manufacturing sector.

He said the APDP will provide appropriate levels of support for these targets while achieving a better balance between domestic and export sales to supply growing domestic demand.

Moderating import tariffs

With import tariffs in mind, the APDP will further create stable and moderate import tariffs from 2012 while aiming to achieve 25% for Completely Built Up Vehicles (CBVs)

The APDP will also seek to attain 20% for components used by vehicle assemblers from 2012.

“Close working relations have been vital for the industry and given the strong interaction that has been shown so far, there is no doubt that we will make a remarkable impact on manufacturing broadly,” said Mphahlwa.

Key elements of APDP

The new APDP is structured in four key elements namely, tariffs, local assembly allowance, production incentives and automotive investment allowance.

The APDP programme will include a Local Assembly Allowance (LAA) which will allow vehicle manufacturers with a plant volume of at least 50 000 units per annum to import a percentage of their components duty free.

The LAA will come in the form of duty credits issued to vehicle assemblers based on 18 to 20% of the value of light motor vehicles produced domestically from 2013, the minister said.

Manufacturers will also receive value-add support which will help encourage increased levels of local value addition along the automotive value chain with positive spin-offs for employment creation. The duty rebate credit will replace the current export based scheme.

MIDP review

The APDP comes after a review of the MIDP was undertaken, which noted that although the MIDP had recorded successes since 1995, the industry faced a number of challenges.

South Africa and the sub-region remained a relatively small market in global terms, isolated from larger markets and shipping routes.

The review revealed that challenges of major domestic infrastructure and logistical inefficiencies were identified while there was a severe skills shortage, among other things.

The review further noted that the revised programme needed to be comparable with major competitors and consistent with World Trade Organisation (WTO) rules.

Article published courtesy of BuaNews