Scheme to lift truck pro­duc­tion

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

FUR­THER dis­cus­sions are planned be­tween the au­to­mo­tive in­dus­try and the gov­ern­ment de­spite Trade and In­dus­try Min­is­ter Rob Davies’s ap­proval of the new medium and heavy com­mer­cial ve­hi­cles au­to­mo­tive scheme (MHCVAIS) guide­lines.

The ob­jec­tive is to stim­u­late in­vest­ment in the pro­duc­tion of medium and heavy com­mer­cial ve­hi­cles in South Africa.

Davies ap­proved the guide­lines on Novem­ber 11 but his decision was only an­nounced yes­ter­day. He said the broad­en­ing of the scope of the Au­to­mo­tive In­vest­ment Scheme (AIS) to in­clude medium and heavy com­mer­cial ve­hi­cle man­u­fac­tur­ers was in line with the broader ob­jec­tives of the pro­gramme and the vi­sion for the au­to­mo­tive in­dus­try to 2020.

“The medium and heavy com­mer­cial ve­hi­cles sec­tor value chains are highly un­der­de­vel­oped and there are op­por­tu­ni­ties to deepen their value ad­di­tion and po­ten­tial for em­ploy­ment cre­ation.”

In­di­ca­tions from the in­dus­try are that the pol­icy di­rec­tion and ap­proach of the MHCV-AIS was not yet cast in stone, par­tic­u­larly a re­quire­ment that man­u­fac­tur­ers would from March 2016 have to as­sem­ble or trim the cab lo­cally to qual­ify for any of the in­cen­tives.

Frank Bee­ton, a con­sul­tant to Econometrix, said there was a feel­ing that cab assem­bly was not vi­able but only a fi­nan­cial ex­er­cise by the man­u­fac­turer would be able to de­ter­mine whether the ben­e­fit of the in­cen­tive made it worth­while to fi­nan­cially in­cur the ad­di­tional cost of in­vest­ing in a lo­cal cab assem­bly fa­cil­ity.

Nico Ver­meulen, the di­rec­tor of the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of SA, said the medium and heavy truck and bus in­dus­try sup­ported the AIS in­cen­tives as the mech­a­nism to drive the value ad­di­tion, ad­di­tional lo­cal­i­sa­tion and em­ploy­ment cre­ation in the do­mes­tic bus and truck in­dus­try.

He said the in­dus­try was in dis­cus­sions with the Trade and In­dus­try Depart­ment on the AIS guide­lines and had made pro­pos­als that were likely to be the sub­ject of fur­ther dis­cus­sions. Th­ese would fo­cus on “tech­ni­cal and def­i­ni­tional mat­ters” and the in­dus­try was plan­ning to have a meet­ing with the depart­ment in Jan­uary.

Ver­meulen was un­aware of any man­u­fac­tur­ers that were wait­ing for the fi­nal­i­sa­tion of th­ese in­cen­tives be­fore invest- ing in the coun­try but in­di­cated that both Iveco and FAW Group had re­cently made in­vest­ments in the coun­try.

Bee­ton said the MHCV-AIS was not a lo­cal con­tent pro­gramme but only an in­cen­tive for new in­vest­ment in ve­hi­cle assem­bly or com­po­nent man­u­fac­tur­ing ac­tiv­i­ties.

He stressed there were not any ad­di­tional penal­ties for man­u­fac­tur­ers and im­porters who elected to con­tinue im­port­ing ve­hi­cles in com­pletely built-up con­di­tion.

That lo­cally as­sem­bled and im­ported ve­hi­cles com­peted in the do­mes­tic mar­ket also sug­gested the present level of im­port du­ties im­posed on im­ported ve­hi­cles were not un­duly puni­tive, he said.

The scheme pro­vides for a non-tax­able cash grant of 20 per­cent of the value of qual­i­fy­ing in­vest­ment in pro­duc­tive as­sets by medium and heavy com­mer­cial ve­hi­cle man­u­fac­tur­ers and 25 per­cent of the value of qual­i­fy­ing in­vest­ment in pro­duc­tive as­sets by com­po­nent man­u­fac­tur­ers and tooling com­pa­nies for MHCV’s as ap­proved by the depart­ment.

An ad­di­tional non-tax­able cash grant of be­tween 5 per­cent or 10 per­cent may be avail­able to projects that are found to be strate­gic by the depart­ment.

The cab may only be im­ported in an as­sem­bled or trimmed con­di­tion into South Africa un­til March 31, 2016.

Projects will be eval­u­ated ac­cord­ing to a num­ber of eco­nomic ben­e­fit re­quire­ments, in­clud­ing value ad­di­tion, em­ploy­ment cre­ation/re­ten­tion and strength­en­ing of the au­to­mo­tive sup­ply chain.

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