Employees assemble cars at a production line of Dongfeng Peugeot Citroen Automobile factory in Wuhan, Hubei province, in this February 13 2014 file photo. Picture: REUTERS/DARLEY SHEN
Employees assemble cars at a production line of Dongfeng Peugeot Citroen Automobile factory in Wuhan, Hubei province, in this February 13 2014 file photo. Picture: REUTERS/DARLEY SHEN

SA wants Namibia to explain a deal allowing French carmaker Peugeot to open an assembly plant in the port city of Walvis Bay to build vehicles for the SA market, among others.

The government and motor companies want to be sure the deal does not breach Southern African Customs Union (Sacu) rules that would allow the vehicles to be exported duty-free to SA and other Sacu members — Botswana, Lesotho and Swaziland.

Import duties are imposed according to the complexity and degree of local vehicle manufacture. Imported car kits, individual components and vehicles completely built in Sacu all carry different duties.

The plant, a joint venture between Peugeot’s parent company, Groupe PSA, and the Namibian Development Corporation (NDC), was launched on Wednesday.

The plant will start by building the Peugeot 3008, then introduce more products according to market demand. The intention is eventually to add Opel cars. PSA bought the Opel brand from General Motors in 2017.

The Walvis Bay facility will assemble imported car kits from France and Germany, a process known as semi knocked-down, or SKD. However, South African officials say they are in the dark about the terms of the deal. They want to know what import duties the vehicles and their individual components attract when landing in Namibia, to be sure they meet Sacu free-trade rules.

Nico Vermeulen. Picture: FINANCIAL MAIL
Nico Vermeulen. Picture: FINANCIAL MAIL

Nico Vermeulen, director of the National Association of Automobile Manufacturers of SA (Naamsa), said on Wednesday: “We are completely in the dark. Namibia has told us nothing. The SA department of trade & industry says it wants clarity. We have also asked SA customs authorities to investigate.”

The Walvis Bay plant is part of a concerted Peugeot attempt to rebuild its footprint in Africa, where it was once a dominant force. PSA plans to open a Nigerian SKD plant, with a medium-term annual capacity of 10,000 units, early in 2019 and is investing heavily in Morocco.

PSA vice-president Jean-Christophe Quemard said the Walvis Bay move was part of the group’s strategy to grow annual sales in Africa and the Middle East to 1-million by 2025. It sold 618,800 cars in 2017. More than two-thirds of those were to Iran. Sacu is a tiny contributor.

Quemard said the Walvis Bay plant hoped to reach annual production of 5,000 by 2020. Even that is an ambitious target. In SA, the overpoweringly dominant regional market, Peugeot has sold 458 vehicles in the past six months and Opel 1,666 — a total of 2,124. Double that for a full year and it approaches the 5,000 target. However, SA sales are shared between multiple products.

A clearer idea of the challenge facing the new plant is demand for the first vehicle, the 3008. It is Peugeot’s most popular SA product but only 176 have been sold in six months. Opel’s top-seller was the Corsa, with 546.

SA used to be a major market for both Peugeot and Opel but sales have dropped in recent years. PSA gave up control of its SA import company, Peugeot-Citroen SA (PCSA), in 2017 ceding 51% to a Japanese-controlled retail group, Trust Auto.

PCSA MD Francisco Gaie said: “We are extremely proud of the investment into Africa by PSA. Peugeot has a long-standing heritage in Africa and this is a continuation of our commitment and efforts to reach new heights for the brand”.

The Citroen brand, despite its share of the company name, has withdrawn completely from the SA market. Opel is imported and distributed independently by the Williams Hunt motor retail group.

Opel vehicles were built in SA until the end of 2017, when GM disinvested. Local Peugeot production stopped in 1985. As recently as two years ago, the French parent was talking of returning through a proposed multi-brand vehicle manufacturing plant in East London. Korean and Chinese brands were potential partners.

That would have allowed Peugeot to share incentives from SA’s Automotive Production and Development Programme, which rewards manufacturing-based investment. SKD gets nothing from the programme.

It is not clear at this stage what incentives the Namibian government offered PSA to operate in Walvis Bay. However, it is known that President Hage Geingob has taken a personal interest in making the deal happen.