"Naacam believes the Department of Trade and Industry must relook the APDP mechanisms as soon as possible to ensure it is an appropriate framework for industry to meet the objectives; namely doubling vehicle production volumes and substantially increasing localisation," said Roger Pitot, executive director of the National Association of Automotive and Allied Component Manufacturers (Naacam). He was speaking at the Automotive Industry Development Centre (AIDC) conference being held in Port Elizabeth as part of the South African Automotive Week.
Pitot's comments follow a comment by Trade and Industry minister Rob Davies, who told guests at the South African Automotive Week gala dinner that government was willing to tweak the APDP programme, which replaces the Motor Industry Development Plan (MIDP).
According to Pitot, component manufacturers are no better off in many respects under the APDP. "The APDP is a duty rebate system - the more you export, the more you have to import. Something is wrong with the logic of the programme," he said. Naacam also does not believe it does enough to ensure that South African automotive production of 1.2 million vehicles by 2020.
Projected volumes from the original equipment manufacturers (OEMs) do not presently add up to the additional 600 000 vehicles a year that would need to be produced to reach the 1.2 million target. Pitot called on government to meet with the OEMs to understand what their plans are for the next eight years. This would help planners identify the gaps and take the necessary steps to support the planned growth of the motor industry.
One of the areas which needs to be addressed is support for the components sector. According to Naacam calculations, OEMs had saved R21 billion on import duties over the past three years through a combination of duty-free allowances and offsets. There is, in effect, no incentive to OEMs to buy locally unless the South African manufacturer can compete on cost.
This is difficult due to the relatively low manufacturing volumes in South Africa, which constrain the ability of component manufacturers to achieve OEM demands for real cost savings. This is further exacerbated by rising costs, notably in electricity, logistics and other monopolistic inputs, as well as wage increases which are not matched by productivity improvements.
Pitot also called on government to provide greater protection for the component sector, which had to compete against hidden subsidies in many low-cost countries. "These subsidies are recognised by many other countries which impose additional duties on subsidised parts," he said. "South African business and government can help the industry reach its target by purchasing locally made cars."
