South Africa is likely to adopt new plans for the country’s car industry in December which aim to increase the local content of assembled cars to 60% by 2035 from around 38% now, a cabinet minister said on Thursday.
The new plan, which will come into effect in 2021, seeks to provide stability for one of South Africa’s main manufacturing sectors, where carmakers have invested billions of dollars to upgrade factories to supply the export market from Africa’s biggest car making hub.
The so-called auto masterplan aims to bolster competitiveness and expand vehicle production in South Africa to 1% of global output. It marks the latest incentive package the government is offering to component and carmakers including Ford, Toyota, BMW and Volkswagen.
Trade and Industry Minister Rob Davies said the new plan would try to get more local companies involved in the making of vehicle parts.
“So that we are not just a footloose place where assembly can take place for the short term, but where there is an ecosystem that is grown in and around the auto sector,” he told Reuters in an interview.
Davies did not want to divulge details of the new plan before it went before cabinet, but said it would be anchored on the existing auto sector incentive package that ends in 2020.
The current incentive package, named the Automotive Production and Development Programme, rewards increased motor vehicle output and refunds import duties based on the amount of local modifications carried out on vehicles.
B&M Analysts, a research consultancy which worked on the new incentive plan, said increasing local content in South African-built cars to 60 percent could add around 135 billion rand ($10 billion) in the domestic auto sector.
Renai Moothilal, executive director of the National Association of Automotive Component and Allied Manufacturers (NAACAM), said “a lot of work has been done in trying to find an incentive package that assists the value chain to get to the 60 percent localisation level.”
Hayley Eagle, who owns one of the first South African companies to supply parts to a car company, known as an original equipment manufacturer (OEM), said companies such as Ford appeared willing to include more local suppliers.
“There is no compromise for their quality standards, the risk is just so high. If you want to supply an OEM, you have to comply to their standards,” Eagle told Reuters.
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