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How the APDP Benefits the Motor Industry in South Africa

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Far more than just another acronym, the APDP or Automotive Production Development Programme is a comprehensive government scheme that has been designed to position the South African motor industry as a more serious contender in the global vehicle market. Introduced in 2008, the original proposal underwent 5 years of extensive review before it was finalised and the scheme was officially implemented in 2013.

This is not the first attempt by the government to boost the country’s automotive industry which, incidentally, accounts for about 6% of the nation’s GDP and around double that percentage of its manufactured exports and which, significantly, is also responsible for employing some 300,000 of South Africa’s citizens. In 1995, a full 18 years before adopting the APDP and in keeping with the new post-apartheid policies, an earlier attempt to support the automotive industry led to the introduction of the so-called MIDP or Motor Industry Development Programme.

Despite providing the hoped-for initial boost to the local industry, the scheme failed to elevate local manufacturing to the levels achieved by other developing countries. Subsequent reviews revealed that the competitors’ superior performance was the direct consequence of the greater financial support and concessions provided by their respective governments. A third review conducted by the Department of Trade and Industry (DTI) was the step finally responsible for the more appropriate and more extensive benefits that are now offered under the terms of the ADPD.

The new scheme also addresses four principal elements, though somewhat modified from those originally defined by the earlier industry development programme. The new scheme also does so both more equably and more generously. The elements in question are aimed at providing stakeholders in this crucial industry with...

·       a means by which to reduce significantly the import duties that are applicable to both vehicle components and pre-assembled vehicles;

·       an incentive scheme that is designed to encourage local manufacturers to increase their own investment through the purchase of new plant, machinery, tools and, or the expansion of their owned premises;

·       an allowance intended to promote a move to include a greater percentage of local content; and

·       financial support to those who are keen to undertake the measures needed to increase their production.

The ADPD benefits apply equally to products that are destined for the home market and to those intended for export, and is applicable to both locally-manufactured light vehicles and to their components. In particular, manufacturers will find that the revised provisions of the vehicle assembly allowance (VAA) are far more generous to companies with significant exports than those offered under the MIDP scheme.

The revision to the VAA allowance now means that vehicle assemblers will receive benefits in the form of duty-free import credits. In 2013, these were based upon 20% of the ex-factory vehicle price and, after a reduction to 19% in the following year; they now stand at a substantial 18%.

Under the ADPD terms, an OEM that exports around half of its production could qualify for a vehicle assembly allowance equivalent to 40% on its domestic component as compared to the 27% duty-free allowance that was offered under the MIDP. Through its offering to the industry of a combination of duty exemptions, rebates and cash grants, the primary goal of the scheme is to both improve its global competitiveness and expand its production. It is believed that, the scheme can provide sufficient impetus to see the annual production of light vehicles in South Africa rise to 1.2 million by 2020 – an ambitious goal given that in 2010 the figure was around a third of that. In the process, the ADPD expects to contribute significantly to reducing the current level of unemployment through the creation of thousands of vital new jobs.

To qualify for the programme’s benefits, a local vehicle assembler will be required to meet certain minimum conditions. In particular, these are related to their resources and the volume of their current production or that achievable within a prescribed period. The regulations surrounding an application are both numerous and stringent and so they are likely to require some fairly close scrutiny in order to avoid any mistakes. Perhaps not surprisingly many people chose to consult a specialist in ADPD matters so as to avoid the pitfalls that might otherwise exclude them.

With offices in Pretoria, Brits and Hillcrest, BCE Consulting is widely regarded as the most experienced source of support with all matters concerning customs duty and incentives, and particularly ADPD applications. 

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Guest Tuesday, 21 August 2018