South Africa’s automotive components manufacturers are losing ground to overseas competitors due to the favourable incentive schemes of those countries, Naacam’s Clive Williams says.
South Africa’s automotive components manufacturers are losing ground to overseas competitors due to the favourable incentive schemes of those countries, Naacam’s Clive Williams says.
Williams, the head of South Africa’s automotive component association (Naacam), told at the weekend that “SA had already lost several investments to countries such as Poland, Slovakia and Hungary”.
He said although government’s motor industry development programme (MIDP) offered benefits to investors, “it was an industry support programme, not an investment incentive scheme.”
By contrast, incentive schemes in competitor countries offered strong financial returns on investments, Williams said, adding that in eastern Europe investors were attracted by tax holidays of several years – ensuring high returns.
“The main reason companies do not invest in SA is not political instability,” Williams was quoted as saying. “The fact is that investors get a far lower rate of return on investments in SA.”
The cost of capital in SA is much higher than in competitor countries. This has, among other things, led to net returns of about 13 per cent, compared with 20 per cent or more in some cases, the report said.
In South Africa, the small and medium-sized enterprises (SMME) development and strategic investment programme compared favourably with those in developed countries.
But SA should, instead, benchmark its incentive schemes against competitor countries in South America, eastern Europe and Indonesia, “because component manufacture has shifted from developed countries to these areas,” Williams said.
He added that South Africa also had to find an incentive solution to cushion the effect of the suspension of the MIDP in 2012. The Motor Industry Development Council – comprising vehicle and component manufacturers, retailers, labour and government – had agreed to establish a subcommittee before year-end, Williams said.
Williams suggested that tax incentives could be offered in a way that did not erode South Africa’s tax base: “We could find a way to grow employee numbers significantly and so enlarge the tax base to make up for the shortfall that would result from company tax breaks.”
CARtoday.com reported last month that Naacam had several initiatives lined up this year to encourage component investment in South Africa. “In June we are taking a delegation to the AAAA show in Australia to look at future involvement in the show and exporting components significantly to Australia,” Williams told CARtoday.com.
“We will be taking about 40 companies to the Equit Auto Show in Paris in October. We will also be passing through the Nordic countries, while the Munich Chamber of Commerce will also arrange meetings for us. In November we are taking a group to the SEMA show,” he added.
