South Africa’s National Association of Automobile Manufacturers (Naamsa) has said new guidelines for the automotive investment scheme (AIS), which falls under government’s new Automotive Production and Development Programme (APDP), should be concluded by the end of this month.
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Naamsa director Nico Vermeulen added that the APDP would replace the current Motor Industry Development Programme (MIDP) in 2013. However the investment scheme, a form of a grant to support investment in new plant and machinery, has fallen behind schedule. It was originally to be introduced on 1 July this year.
South Africa’s Engineering News bulletin noted that, earlier this month, BMW South Africa announced that it would spend ZAR2.2bn (US$304m) upgrading its plant, in Rosslyn, saying it was doing so on the back of a letter from the government, promising that it would qualify for the APDP AIS allowance and urged the administration to wrap up all aspects of the APDP as soon as possible, providing investment certainty for the local industry.
There have been concerns within the auto industry that the government would not have sufficient funding to honour the AIS should it be made available as a cash grant. The industry said the government should consider making it available as a duty credit. A vehicle manufacturer could then use this credit to import vehicles it does not produce locally.
Johan Cloete, of JFS Technology, who played a leading role in the last two MIDP reviews, told Engineering News: “Let’s say a company invests ZAR1bn. It may then get up to ZAR300m back over a three-year period. However, what if the automotive industry collectively invests ZAR6bn in a particular year, and government must then pay back ZAR2billion over a three-year period?
“There is a real risk that the government will run out of money; that its budget will not be able to carry such a payment. This is why it is important to also consider duty credits.”
