The government’s latest development strategy for the motor industry “will kickstart economic activity in the value chain and unlock opportunities around transformation and employment”, Renai Moothilal, executive director of the National Association of Automotive Component and Allied Manufacturers (Naacam), said on Friday.

He was speaking after trade and industry minister Rob Davies unveiled an extended programme that will require SA-based motor companies to drastically increase local content in their vehicles and drive increased black participation in the industry.

Davies estimates the changes will double motor industry employment from 120,000 to about 240,000.

The Automotive Production and Development Programme (APDP), which has governed the industry since 2013, is due to expire at the end of 2020. However, instead of being replaced, as was the case with previous programmes, it will be extended to 2035. The underlying principles will remain but there will also be important policy changes, to repair what Davies considers to be shortcomings in the current process.

Andrew Kirby. Picture: SUPPLIED
Andrew Kirby. Picture: SUPPLIED

At present, vehicle manufacturers earn duty rebates according to the number of vehicles they build. From 2021, they will be measured on local content. The current industry average is 38%.  Davies expects this to reach 60% by 2035. Some companies could lose out heavily on rebates in the early days of the new dispensation.

Toyota SA CEO Andrew Kirby, who is also president of the National Association of Automobile Manufacturers of SA (Naamsa), said: “Levels of support for vehicle manufacturers will reduce significantly and the only way to recoup the benefits is through progressive and substantial increases in localisation — while remaining internationally competitive”.

Among other changes, component suppliers will gain more access to investment incentives previously dominated by vehicle manufacturers, and there will also be extra incentives for investment in new technologies.

The cabinet has approved the extended APDP but the Treasury has still to finalise details of some incentive payments. Discussions are also continuing between motor companies and the government on the size of an “equity equivalent” fund after companies refused to hand shares to local black partners.

The fund will be used to identify and develop black automotive industrialists. Originally, it was expected to be about R3.5bn but now it’s thought it will be closer to R4.5bn.

The APDP is part of a broader automotive masterplan that Davies hopes will increase local vehicle production from 600,000 to at least 1.2-million by 2035.

Other elements of the masterplan include growth of the domestic new-vehicle market; skills development; improvements in road, rail and port infrastructure; and co-operation with other Sub-Saharan countries to develop both vehicle demand and a co-ordinated regional industry.