ROGER PITOT
Competing demands around the APDP are being carefully considered as part of the APDP review
Photo by: Duane Daws
The review of the Automotive Production and Development Programme (APDP) has benefitted from input from automotive manufacturers, labour unions and component manufacturers and the complete inputs will be presented to the stakeholders for final comments before the recommendations are presented to the Department of Trade and Industry (DTI) in October.
The review must balance many competing demands, including policy stability and certainty demanded by international automotive manufacturers, localisation thresholds that incentivise local component manufacturers, union demands for jobs, international competitiveness concerns and the cost of the incentives to the national fiscus, explained DTI industry expert advisor and review coordinator Roger Pitot.
Policy certainty is imperative, as automotive manufacturers invested based on the existing APDP and tended to caution against large or fast changes to policy, while component manufacturers also wanted to increase the volumes of components manufactured to improve their competitiveness and government wanted to ensure that the costly incentives stimulated local industry and improved the country’s balance of trade.
Further, some of the production incentives might be reconsidered to enable automotive and component manufacturers to achieve higher levels of production and localisation, as well as to rationalise and enhance, where appropriate, incentives around the use of vulnerable products and standard materials produced in the country.
The cost of logistics in South Africa, through its ports and via its border posts into the continent, had also been raised as a significant barrier to export competitiveness.
The global economic conditions have changed since the programme was designed in 2008, which might also affect considerations of the incentive programme, as the original-equipment manufacturers note that lower demand affects their volumes of production and, hence, their use of local components. Local component manufacturers note that the low volume of components increases costs per unit, affecting their competitiveness, while the increasing variants of model derivatives increases production complexity.
The incentives are intended to produce positive results for the broader economy and the review will also aim to ensure a better balance between enhancing production of vehicles and components and enabling manufacturers to import significant volumes of vehicles or components duty free, which is in line with the DTI’s objectives to balance stimulation of local industry while meeting international trade obligations.
The APDP replaced the export-oriented Motor Industry Development Programme with the aim of stimulating local production of automotive components and materials while maintaining the incentives for automotive manufacturers to produce cars in the country for export and the local market.