Disaster-stricken automakers lost government incentives. This has since changed
Toyota South Africa Motors welcomes the new amended regulations, which will support it on the difficult journey of resuming operations at its plant.
Automotive Industry Staff Association
- An incentive program aimed at developing the local auto industry failed to take into account the impact that disasters can have on production.
- Since the scheme requires certain production volumes over specific periods, companies ran the risk of missing out on the benefit if production was halted or delayed due to the impact of a disaster.
- The government has now filled the legal loophole by allowing affected companies to apply for a temporary reprieve to meet production volumes without losing their incentive.
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The government has filled a loophole in legislation so that disasters do not prevent the local auto industry from reaping the benefits of a government incentive scheme.
The Automotive Production and Development Program (APDP2) promotes production volumes in automotive manufacturing and value addition in the automotive components industry. It is part of a long-term master plan to grow the automotive industry and create jobs along the value chain.
South Africa’s automotive business council, Naamsa, estimates that major automakers invested R8.8 billion in the sector in 2021 and R9.23 billion in 2020.
Under the APDP2 program, a calculated Company Specific Percentage (CSP) determines the amount of a duty rebate or refund.
Specific production volumes must be achieved to qualify for a refund or rebate. In reality, unforeseen disasters can prevent a manufacturer from reaching the required volume, which means they lose the rebate or refund.
The Department of Trade, Industry and Competition (dtic) says the amendment fills a gap in the regulations to deal with national disaster situations. Such disasters may affect manufacturers to the extent that they may need to limit or temporarily shut down their operations and therefore be unable to meet their performance obligations under the APDP2.
Program participants can now apply to dtic for permission to temporarily deviate from the unusual volume requirement and continue to receive program benefits.
Customs and international trade expert Prenisha Martin says the amendment is key to ensuring the sustainability of such manufacturers in South Africa, citing the floods in KwaZulu-Natal last year and earlier this year as a ‘example. Some manufacturers suffered major damage to their production facilities. This not only resulted in reduced or delayed production, but also meant that they did not qualify for APDP2 discounts and refunds.
“Prior to the amendment published on August 3, 2022, the APDP2 regulation did not provide for a waiver of the vesting requirements,” explains Martin.
Toyota’s manufacturing plant south of Durban, the largest in KwaZulu-Natal, is expected to be fully operational by the end of September, nearly 25 weeks after being hit by heavy flooding in the area earlier this year . About 12% of the 4,596 homes on the site at the time of the flood had not suffered any damage.
Toyota South Africa Motors (TSAM) welcomes the new amended regulations, which it hopes will support them on the difficult journey of resuming operations at their plant.
For TSAM, the changes indicate continued collaboration between the automotive industry and dtic.