Oct 11, 2012
Auto component production not sufficiently incentivised – NaacamBack
Port|Port Elizabeth|Africa|Components|System|Africa|South Africa|Automotive|Local Component Manufacturing Sector|Manufacturing|Roger Pitot
© Reuse this
Speaking at the South African Automotive Week, held in Port Elizabeth, Pitot said the APDP retained the duty-offset system of the Motor Industry Development Programme (MIDP) it would replace in 2013, whereby OEMs cash in their benefits by importing vehicles and components at lower duty rates, thereby providing little or no protection to component makers in South Africa as there was “effectively no import duty paid on components”.
“The APDP is still a duty rebate system. So, the more OEMs export and add value, the more they can also import,” said Pitot.
He noted that high enough vehicle exports – such as 80% of vehicle production from a plant - could ensure that OEMs could import all their component requirements duty-free.
Why would they then source their components locally, asked Pitot.
He added that OEMs had, from 2009 to 2011, imported R108-billion worth of components and subcomponents, while duties paid on these were R446-million, or 0.41%, compared with the R21-billion, or 20% which would have applied without the MIDP duty rebate.
Pitot also emphasised, however, that Naacam regarded the APDP’s production incentive, which rewarded local value addition, as a positive opportunity for the local component manufacturing sector.
He said real local content on locally produced vehicles was around 35% compared with the 55% to 60% often quoted, as the imported content of locally made parts had to be substracted first.
“The correct way is to measure the total component cost, less [the value of] all imports of components, subcomponents and materials,” he said.
“Many tier-one [component] suppliers still import substantial amounts of materials and subcomponents.”
Pitot said a bigger production incentive under the APDP would assist in curbing this trend. It would also promote the expansion of “sunrise type” of component industries in South Africa, seeing to the increased production of parts currently not flourishing under the MIDP’s incentive structure.
“Naacam believes the Department of Trade and Industry must relook the APDP mechanisms as soon as possible to ensure it’s an appropriate framework for industry and government to meet its objectives, namely doubling vehicle production volumes and substantially increasing local content,” he added.
When discussing general barriers to global competitiveness, Pitot noted that vehicle volume production were still low in South Africa, which constrained component manufacturers’ ability to achieve OEM demands for real cost savings.
Pitot noted that production of 100 000 units a year allowed for a far greater competitive advantage than 50 000 units a year.
“Monopolistic costs”, such as electricity tariffs, were also pushing up costs, while wage increases were not matched by productivity improvements.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Automotive News
Updated 34 minutes ago Big cities across the world struggle with crime, and Zimbabwe’s Harare is no exception. Naison Gumpo, a journalism student studying in the capital, knows this only too well.
Updated 1 hour 26 minutes ago About 1 000 workers at the construction site of South Africa's Eskom Medupi power plant have been fired for vandalising property during this week's one-day strike, the power utility's spokesperson said on Friday. About 21 000 contract workers went on a one-day strike...
Updated 2 hours 6 minutes ago Government continues to stress the importance of the agroprocessing agenda in an attempt to bolster economic growth and job creation, while also securing South Africa’s future food requirements in an economy that fell short of its growth target in 2014, achieving...
Recent Research Reports
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments.
Article contains comments