S. Africa offers carmakers ‘generous’ tax breaks
PRETORIA: South Africa is proposing carmakers including Toyota Motor Corp, Ford Motor Co and BMW AG more than double production in return for tax breaks so generous that the companies can ship the cars all the way to Europe.
The auto industry accounts for about seven per cent of South Africa’s gross domestic product and has been one of the few highlights of a period of sluggish economic growth, according to the National Association of Automobile Manufacturers of South Africa (Naamsa).
That can be put down to a state-incentive programme that expires at the end of 2020, which both the carmakers and Trade and Industry Minister Rob Davies are keen to extend for another 15 years.
At stake is a potential reversal of a steady flow of new investment by carmakers.
BMW has spent more than six billion rand (RM1.86 billion) on a plant in Rosslyn, north of here, and last month started production of the X3 sport utility vehicle at the site, the first time it’s been made outside the United States.
Volkswagen AG and Nissan Motor Co both announced major expansion plans in 2015, while China’s Beijing Automotive International Corp is constructing an 11 billion rand facility in the coastal city of Port Elizabeth.
With talks under way, the two parties were at odds on a number of issues — especially the state’s targets for what it wanted the industry to achieve by 2035, according to Naamsa director Nico Vermeulen.
A production increase over that period to one per cent of global output, or as many as 1.5 million vehicles a year, was over ambitious, he said.
South Africa produced about 600,000 units last year, the majority for export, and Naamsa forecasts an increase to 850,000 in 2020.
A second point of contention in the negotiations is a government demand for the carmakers to double the size of their combined workforce to about 225,000.
That was unrealistic given the global industry’s shift towards robotics and automation, said Vermeulen.