A total of R584 million has been paid out by government in the past few months to the local automotive industry, through the Automotive Incentive Scheme (AIS), part of the new Automotive Production and Development Programme (APDP). Most of the incentives were paid in the Eastern Cape, with the Ford Motor Company of Southern Africa (FMCSA), a major beneficiary. Francois Truter, Director of Investment Projects at the DTI, said the AIS payouts followed investment commitments in terms of the scheme of R13 billion from original equipment manufacturers (OEMs) and component suppliers, supporting 20 000 jobs. The investment incentive in terms of the AIS is 20% of a company’s investment within SA, and is tied to certain performance criteria, including volume growth, employment growth, new technology and localisation. An additional incentive of 10% is tied to performance. Duane Newman, a partner at Deloitte, said earlier this year that most OEMs would struggle to get the 30% incentive. However, Jeff Nemeth, FMCSA’s President and CE, confirmed that it had applied for the full 30% incentive available in terms of the AIS, and had already received the first instalment comprising 16% of its investment. He added that not all but the majority of FMCSA’s recent R3.4bn in South Africa qualified for the AIS incentive. FMCSA’s investment was used to upgrade and expand production facilities at its engine plant in Port Elizabeth and its assembly plant in Silverton in Pretoria, which has increased its annual production capacity to 110 000 vehicles. The investment was made in preparation for domestic production of the new Ford Ranger pickup. The first units for distribution will be produced in FMCSA’s Silverton plant from September 1. Apart from being distributed in SA, the vehicle will be exported to 148 countries, largely in Africa and Europe. FMCSA recently officially opened its upgraded engine plant in Port Elizabeth. Speaking at the function, Truter said the automotive sector was a critical one to any economy, in any country, because it linked several industries and services. He said the automotive sector was the leading manufacturing sector, contributing 4.8% to GDP in 2009, and employed at least 129 000 people in the manufacturing of systems, components and vehicles. Truter continued that the new APDP strengthened and broadened the automotive products and medium and heavy commercial vehicle sectors. He said the twin objectives of the DTI was to raise the volume of automotive products production to 1.2 million vehicles by 2020, and substantially deepen and diversify the component supply chain. However, Truter admitted the medium and heavy commercial vehicle sector had not received adequate policy attention. He believed there was an opportunity to resuscitate bus production in South Africa as well as the medium and heavy commercial vehicle segments. This was despite the industry facing a number of challenges, which included economies of scale in this segment and the fact that the depth of domestic component manufacturing was not yet internationally optimal.
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