The Automotive Investment Scheme, which is to be effective until 2019, will grant manufacturers of light vehicles and components a taxable cash grant of 20%.
The scheme is part of the department's car-making production and development programme that is intended to replace the motor industry development programme by 2012.
To qualify for the grant, car manufacturers should meet the annual target of producing 50000 new or replacement vehicles per plant within a three-year cycle.
Component manufacturers wishing to qualify for the scheme are required to prove that they have a contract to supply light motor vehicle components that would be able to achieve an investment return of at least 25% of turnover.
Tumelo Chipfupa, the department's deputy director-general, said that the programme "will be providing incentives that were not previously available to suppliers within the industry".
"By extending incentives to beyond the first- and second-tier suppliers, the department hopes to strengthen and improve the global competitiveness of the small and medium enterprises that form part of the automotive supply chain," Mr Chipfupa said.
"We hope the end result will be increased South African value added in locally produced cars as well as increased employment in the industry as (such enterprises) are usually more employment-intensive."
An additional taxable cash incentive of between 5% and 10% would be made available to manufacturers if they could create sustainable job opportunities. This also applied to other projects that would have a positive effect on SA's economy.
Preference would be given to companies that could show that, through the grant, they could strengthen the car-making supply chain, invest in research and development, support the local tooling industry and increase the turnover of component manufacturers.
Chipfupa emphasised that companies would be subjected to a thorough assessment to ensure the department was not shortchanged on the qualifying criteria.
According to Nelson Mandela Metropolitan University's Prof Kobus Jonker, the car-making industry is one of the largest employment sectors in SA, after the mining and financial services industry.
He estimates the industry will contribute at least 4% of employment opportunities this year while growth in other manufacturing sectors is expected to remain stable.
The Automotive Investment Scheme will start on the first day of next month. The department is encouraging interested manufacturers to contact its enterprise division for more information and advice on the programme.
However, application forms for companies wishing to be part of the scheme will only be available on the department's website from 14 June.
Source: Business Day
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