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Automotive Production Development Programme

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Automotive Production Development Programme Offers Boost to SA Motor Industry

The automotive production development programme is aimed at stimulating the growth of South Africa’s motor manufacturing sector and comes at a time when the rising cost of extracting gold, combined with its lacklustre performance, threatens the traditional backbone of our economy. This important new scheme was approved by the SA government in 2008. Following an intensive review, it eventually replaced the existing Motor Industry Development Programme (or MIDP) some 5 years later. 

Intended to level the playing field for local manufacturers by providing them with the means to become more globally competitive, the ambitious goal of the plan is to see local production increased by the year 2020 to 1.2 million vehicles annually. Given the advances in this sector achieved in recent years by countries such as India and China, the automotive production development programme aims to overcome the various challenges that were eventually encountered by the, initially very successful, MIDP.

The new programme, better known by its abbreviation APDP, recognises the strategic importance of the motor industry, the largest in the manufacturing sector, to South Africa’s economy. The programme, therefore, is aimed at assisting it to increase the domestic content of the vehicles that are assembled in local plants. In parallel, it also addresses the need to expand the manufacture of components domestically.

One particularly significant aspect of the revisions to the MIDP is that the new automotive production development programme will provide a uniform type of support that is more market-neutral. Under this programme there will no longer be any discrimination between the support offered for those products intended for sale to the local market and those that are destined for export. With domestic demand growing, this will encourage a more balanced production policy.

How the Programme Works

The plan consists of four main elements that are intended to address production incentives, tariffs and the allowances relating to automotive investment and local assembly respectively. However, the support programme is intended to boost the efforts of those that appear to offer the greatest chance of success. For this reason, in order to gain the benefits available under the automotive production development programme, South Africa’s motor manufacturers will be required to meet a number of qualifying conditions. 

The local assembly allowance (LAA) takes effect from 2013 and applies to manufacturers whose annual production amounts to 50,000 units or more or who can demonstrate that they will achieve this level of productivity within a specified period. Those who comply with these requirements are then entitled to import a percentage of their components free of duty. The concession takes the form of duty credits amounting to between 18% and 20% of the value of a manufacturer’s locally produced light motor vehicles since its inception.

Further value-add support from the automotive production development programme is offered as a means to encourage the addition of more local value across the vehicle supply chain. It is also hoped that this will serve as a means to create some new and badly needed opportunities for currently unemployed South Africans.

Part of the programme and aimed at encouraging investment by the industry, the automotive investment scheme (AIS) could result in a welcome cash grant of between 20% and 30% in support of a qualifying investment in new machinery, tools or owned premises.

Professional Help with Applications to the Programme

As one might expect from a government scheme that offers its beneficiaries this level of financial support, the automotive production development programme is required to operate a stringent application process.  The process is both a lengthy one and one that will require strict compliance with procedures and conformity with the qualifying conditions. As a consequence, to avoid errors and misunderstanding it is advisable to seek some professional guidance with the process.

BCE Consulting is an acknowledged leader in this specialised field and in all matters related to the incentive grants and concessions that are currently available to various South African industries via the Department of Trade and Industry (DTI). Founded in 2006, the company is dedicated to assisting its clients to obtain the maximum benefits for which they qualify under any and all of the various government incentive programmes that are currently operating in South Africa. There is no company better experience to assist you with your application to the automotive production development programme. 

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Guest Sunday, 19 August 2018