New ‘master plan’ could inject R135bn into SA’s car industry
Government close to adopting incentive package with high local content
The government is likely to adopt new plans for the country’s car industry in December that aim to increase the local content of assembled cars to 60% by 2035.
Currently the local content is 38%. The new plan, which will come into effect in 2021, seeks to provide stability for one of SA’s main manufacturing sectors, where carmakers have invested billions of dollars to upgrade factories to supply the export market from Africa’s biggest car-making hub.
B&M Analysts, a research consultancy that worked on the new incentive plan, said increasing local content in SA-built cars to 60% could add about R135bn to the domestic automotive sector.
The so-called masterplan aims to bolster competitiveness and expand vehicle production in SA to 1% of global output.
Latest incentive package
It marks the latest incentive package the government is offering to makers of components and cars, including Ford, Toyota, BMW and Volkswagen.
Trade & industry minister Rob Davies said the new plan would try to get more local companies involved in the making of vehicle parts.
"So that we are not just a footloose place where assembly can take place for the short term, but where there is an ecosystem that is grown in and around the auto sector," the minister said in an interview.
Davies did not want to divulge details of the new plan before it went before cabinet but said it would be anchored on the existing automotive sector incentive package, which ends in 2020. The current package, named the Automotive Production and Development Programme, rewards increased motor vehicle output and refunds import duties based on the amount of local modifications carried out on vehicles.
Renai Moothilal, executive director of the National Association of Automotive Component and Allied Manufacturers, said: "A lot of work has been done in trying to find an incentive package that assists the value chain to get to the 60% localisation level."
Hayley Eagle, who owns one of the first SA companies to supply parts to a car company, known as an original equipment manufacturer (OEM), said companies such as Ford appeared willing to include more local suppliers. "There is no compromise for their quality standards, the risk is just so high. If you want to supply an OEM, you have to comply to their standards," Eagle said.