NATIONAL ASSEMBLY
FOR WRITTEN REPLY
QUESTION NO 2136
Mrs S J F Marais (DA) to ask the Minister of Trade and Industry:
(1) (a) What is the quantum of the incentives that the Government will
grant to BMW in terms of the Motor Industry Development Programme, (b) what
is the expected monetary return for the economy from these incentives to
BMW, (c) over what period will this be realised and (d) when will the break-
even point be reached;
(2) Whether only BMW will benefit from these incentives; if not, who
else; if so, what are the relevant details? NW2816E
REPLY:
(1)
a) The quantum of support accrued by any particular automotive
company is calculated in terms of the rules of the Motor
Industry Development Programme (MIDP), and from 2013 onwards the
Automotive Production and Development Programme (APDP).
However, the investment component of the APDP: the Automotive
Investment Scheme (AIS) will kick in earlier and apply to
investments made from July 2009 onwards.
For the MIDP the following elements of the programme apply according
to the following formula:
Tariffs CBU CKD
2007 30% 25%
2008 29% 24%
2009 28% 23%
2010 27% 22%
2011 26% 21%
2012 25% 20%
Import Rebate Credits
Based on exported local content
Export Sales less imported component X applicable import duty
Duty Free Allowance
27% of locally produced domestic sales remains till 2012
Import Rebate Credits
Based on exported local content
Export Sales less imported component X applicable import duty
Productive Asset Allowance
20% of qualifying investments (land & buildings excluded)
Targeted at OEMs rationalization
From 2013 the following elements of the APDP will apply according to the
following formula:
⢠Tarriffs: Stable, moderate tariffs will remain at 25% for light
motor vehicles and 20% for components from 2012.
These tariffs are meant to provide just enough protection to
justify continued local vehicle assembly.
⢠Local Assembly Allowance: This support will be in the form of
duty credits issued to vehicle assemblers based on 20 â 18% of
the value of light motor vehicles produced domestically from
2013.
This support is effectively providing a lower duty rate for local
assemblers and should provide enough encouragement for high
volume vehicle production in line with the target of doubling
production.
⢠Production Incentive: From 2013 this support of 55-50% of value
added computed in simple terms as sales less raw materials, in
the form of a duty rebate credit, will replace the current export
based scheme. Thus the actual benefit will be 55% X value add X
applicable duty rate in 2013. The value-add support will
encourage increasing levels of local value addition along the
automotive value chain with positive spin-offs for employment
creation.
⢠Automotive Investment Scheme From July 2009, this assistance will
replace the current Productive Asset Allowance and will be 20% of
qualifying investment paid over to participants over a three year
period. The payment will be in a form of cash grant.
This support will be available to encourage investments by
vehicle assemblers and component manufacturers in a manner that
supports equipment upgrading.
Being formula driven, the precise quantum than any individual company
receives will depend on levels of the variables set out in these
formuli, including:
⢠Level of investment
⢠Level of production
⢠Level of exports (only under the MIDP)
⢠Level of value-added
The quantum that BMW will earn on an annual basis from the programme
will depend inter alia on the following: their levels of investment,
production, value-added as well as the prevailing discount in the
market at which import rebate credit certificates (IRCCs) are trading.
b) However, at the level of the overall MIDP/APDP programme the IDC
has calculated that the net economic impact of the programme
between 2008 and 2012 is extremely positive. These calculations
consider key economic variables in 2020 depending on whether the
MIDP/APDP is in place or not. Taking into consideration both the
first round and induced impact of the programme on the economy,
they calculate that with the MIDP/APDP in place.
⢠Gross domestic product will be R103.3bn higher by 2020 than if
there is no support programme.
⢠Investment will be R151.7bn higher by 2020 than if there is no
support programme.
⢠Employment will be 320,000 higher by 2020 than if there is no
support programme.
⢠The trade deficit will be R833.3m smaller in 2020 than if there
is no support programme.
⢠Net government revenue will be slightly higher: R19bn by 2020
than if there is no support programme.
c) These net economic benefits will be realized over the period
2008 to 2012, that is: 12 years
d) The IDC calculations indicate that the programme is likely to be
net revenue positive by an amount of approximately R19bn by
2020, while delivering large economic contributions to GDP,
investment and employment through positive multiplier and
linkage effects through the economy relative to a scenario under
which there is no support programme.
(2) Automotive manufacturing firms located in South Africa and who meet the
specified criteria to participate in the Motor Industry Development
Programme and its successor will benefit from the incentives. It is
anticipated that all major vehicle manufacturers (BMWSA, FMCSA, GMSA, MBSA,
NissanSA, TSAM and VWSA) will draw upon the programme.