Two prominent speakers at the SA Automotive Conference have suggested that the motor industry will need further government support, after the MIDP expires in 2012, to ensure South Africa's future growth in the lucrative global car market.
Two prominent speakers at the SA Automotive Conference have suggested that the motor industry will need further government support after the MIDP expires in 2012 to ensure South Africa's future growth in the lucrative global car market.
Since the MIDP's inception, South African subsidiaries of international vehicle manufacturers have enjoyed immense benefits that have allowed the industry to thrive. However, the programme has recently come under fire with Australia threatening to challenge the MIDP before the World Trade Organisation, while local trade unions have argued that the programme has not met all of its objectives.
Fred von Eckardstein a director at KPMG on Tuesday said that while the MIDP has helped the local automotive industry immensely, a new programme had to be developed that would not disturb South Africa's trading partners. He said the new programme would need to overcome this country's geographical disadvantage so that it would be able to compete with rival countries.
SA had to present an attractive proposition to successfully compete for investment against countries like Slovakia, where a 15 per cent flat tax rate had drawn a substantial investment, von Eckardstein said.
Garel Rhys, the director of the Centre for Automotive Industry Research at Cardiff University Business School, said that as more vehicles were being built, manufacturers would need to build about 180 new assembly plants producing 300 000 units a year to meet with the increased demand over a twenty year period.
According to Rhys, this demand would see investments in the global industry worth about R480-trillion. He added to that most existing plants internationally would need to be extensively revamped or replaced to remain competitive.
The vehicle sector in the country is one of the largest sources of foreign investment and this year it is expected that investments in the South African vehicle manufacturing sector would be worth about seven billion rands.