To increase the local content of assembled cars to 60 percent by 2035 from around 38 percent now, South Africa will adopt new plans for the country’s car industry in December 2018. The new plan will come into effect in 2021 and seeks to provide stability for the car industry, which happens to be one of South Africa’s main manufacturing sectors.
In South Africa, car makers have invested billions of dollars to upgrade factories to supply the export market from Africa’s biggest car making hub. The plan aims to boost competitiveness and expand vehicle production in South Africa to 1 percent of global output. It is the latest incentive package the South African government is offering car makers such as Ford, BMW, Volkswagen and Toyota.
Rob Davies, the trade and industry minister, who acknowledged the plans would be designed to get more local companies involved in the making of vehicle parts, said “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”. He added that the plan will be anchored on the existing auto sector incentive package that ends in 2020.
South Africa’s Automotive Production and Development Programme, which is the country’s current incentive package, rewards increased motor vehicle output and refunds import duties based on the amount of local modifications carried out on vehicles.
According to B&M Analysts, a research consultancy which worked on the new incentive plan, said increasing local content in South African built cars to 60 percent could add about $10 billion to the domestic auto sector.
The Executive Director of the National Association of Automotive Component and Allied Manufacturers (NAACAM), Renai Moothilal said “a lot of work has been done in trying to find an incentive package that assists the value chain to get the 60 percent localisation level”.
The CEO of Jamsco, Hayley Eagle, one of the first South African companies to supply parts to a car company known as Original Equipment Manufacturer (OEM) noted that companies like Ford appear willing to patronise more local suppliers. She however said that “there is no compromise for their quality standards, the risks are just so high. If you want to supply an OEM, you have to comply to their standards”.