Problems relating to Trade and Investment on South Africa

2. Grant of a preferential tariff rates based on increased home production, and/or local procurements
Issue	Issue details	Requests	Reference

(1) Localisation Requirement

- As regards the requirement for the localisation rate achievement, the process for the exemption application and the exemption list for products and parts, which are incapable of localisation, due to the cost economy (in regard to international competitiveness, and marketability) and to realization, have not yet been prepared.

- It is requested that Government of South Africa (GOSA) takes steps for:
-- clear, express identification of the exempted parts,
-- early establishment of exemption list for products and parts, and its subsequent timely renewal, and
-- nimble response to the exemption application.

(2) Overly Protective Preferential Treatment on Local Production	- Automotive industry policy in South Africa has evolved by the grant of incentive measures: from MIDP (Motor Industry Development Programme) initiated in September 1995 to APDP (Automotive Production Development Programme) since 2013, while by so doing, avoiding conflict with WTO. It has materially injured the fair competition with import dealers of finished car products. It has focussed mainly on holding back departure of the existing automotive manufacturers by offering protectionist excessive incentives. The results: the existing domestic businesses are assured of continuation of their business without hardly any effort for upgrading the qualitative competitive edge of their products, while containing the importers' growth possibility by additional requirements of minimum 50,000 units production. - New APDP which has been implemented since 2013, provides measures to give preferential treatment on enterprises manufacturing more than 50,000 units of vehicles per annum under GVW 3.5 tons. It is said hereafter preferential measures will be further tightened so that it will become difficult to maintain and/or invest into the local production facilities.	- It is requested that Government of South Africa (GSA) nurtures / supports automotive policy making authorities with an international vision. - Provision of opportunities for seeing/hearing positive experiences in other countries. - Educational campaign leading to sound policy development. - It is requested that GSA deregulates the current policy or postpone the timing of reviewing incentive measures.	- Automotive Production And Development Program
	(Info) - Automotive Investment Scheme (AIS): The AIS provides for a cash grant of twenty percent (20%) the value of qualifying investment in productive assets. On an investment project recognised as Strategic by Department of Trade & Industry (DTI), additional 5% or 10% financial assistance will be granted and paid out in equal installment over the 3-year period. - IIn January 2013, in lieu of the previous MIDP, Automotive Production and Development Programme (APDP) was introduced. The APDP is a programme to foster the South African automotive industry (that gives preferential treatment to the domestic car assembly in S.A.) Its introduction, continuing into 2020, will enhance the competitive edge of the car parts manufacturers and create job opportunities. GOSA has switched from the previous export subsidy to domestic production subsidy to make it consistent with the WTO rules. GOSA sets its goal to reach 1.2-million car production per annum by 2020. Under APDP, GOSA will issue credit to set off the tariff levied on imported parts to car manufacturers producing 50,000-cars or more per annum within South Africa. In addition, for protection of the domestic car assembly industries, import tariff rates for finished car and car parts will be held at 25% and 20%, respectively. Up to now, GOSA has issued credit to set off import duty on finished cars and parts thereof against export value. However, hereafter, GOSA will issue credit corresponding to 50-55% of the domestic added values.

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