The Department of Trade and Industry (DTI) has approved 181 projects to benefit from government’s automotive investment scheme (AIS), says DTI AIS director Anna Theron.
The scheme forms part of the Automotive Production Development Programme (APDP), which replaced the Motor Industry Development Programme.
Theron says 15 projects have been approved for vehicle manufacturers, and 166 projects for components manufacturers, with the AIS paying out R2.7-billion in total from 2010 to the end of January this year.
The investments approved for the AIS are valued at R21.8-billion in total, creating 9 542 jobs, she adds.
The first two people-carrier AIS payments were made in March, as part of an extension to the APDP to cater for the local assembly of minibus taxis.
The AIS provides firms with a taxable cash grant of 20% of the value of qualifying investments in productive assets.
To qualify for the 20% grant, a light motor vehicle manufacturer has to introduce a new or replacement model for production and demonstrate that it will achieve a minimum production of 50 000 units a year within a ramp-up period of three years.
A components manufacturer has to prove that a contract has been awarded for the manufacture of components to supply into the light motor vehicle manufacturing supply chain, and that the investment will achieve at least R10-million, or 25%, of total entity turnover from the light motor vehicle manufacturing supply chain.
An additional taxable cash grant of 5% or 10%, over and above the 20% taxable cash grant, is available to projects that comply with specified economic benefit requirements, and which can demonstrate that the investment will result in base-year employment levels being maintained throughout the incentive period and, in the case of light motor vehicle manufacturers, that these levels will be maintained during the model phase-out period.
Requesting Leniency
Theron says the DTI has received two requests for leniency from vehicle manufacturers on their AIS volume requirements.
She declines to name the manufacturers.
One manufacturer had to achieve a yearly production volume of 65 000 vehicles, owing to the company’s initial plant volumes.
“The volume requirement is based on plant volumes prior to the start of production for the AIS,” explains Theron.
“I also had another request for leniency from a [vehicle manufacturer] that had a 50 000-unit-a-year requirement.”
Leniency to achieve the target figures was provided for two months, says Theron, and indications are that these figures were met by the end of February.
“The leniency request was motivated by last year’s automotive strike, which had an impact on production volumes.”
The AIS is currently the subject of some redrafting to aid components manufacturers, adds Theron.
“The guidelines are being revised and these should be published after April. At this stage, it is proposed that the grant percentage levels be increased for components manufacturers.”
The existing AIS guidelines provide for a 20%, 25% or 30% grant for component makers and, if approved by Trade and Industry Minister Dr Rob Davies, the revised guidelines could provide for a 25%, 30% or 35% incentive on qualifying investments.
Theron emphasises, however, that these increases have not yet been approved.