South Africa proposes tax breaks for automakers and makes employment demands

South Africa is proposing a generous tax break to automakers if they more than double production in the country. The government is proposing that the automakers take their combined workforce to about 225 000.

Automakers, however, have complained that the incentives the government is offering does not equate its demands. According to NAAMSA Director Nico Vermeulen, “The levels of support proposed are inadequate and insufficient to realize the ambitious targets, we need internationally competitive levels of support.”

He added that the manufacturers are committed to increasing production and employment if the incentives are adequate. They are reluctant to agree to specific targets.

In South Africa, the auto industry accounts for about seven percent gross domestic product and has been one of the few highlights of a period of sluggish economic growth, according to the National Association of Automobile Manufacturers of South Africa (NAAMSA).

Currently, BMW has spent more than 6 billion rand ($470 million) on a plant in Rosslyn, north of Pretoria, and last month started production of the X3 sports-utility vehicle at the site, the first time it’s been made outside the U.S.

In 2015, Volkswagen AG and Nissan Motor Co. both announced major expansion plans, while China’s Beijing Automotive International Corp. is constructing an 11 billion-rand facility in the coastal city of Port Elizabeth, Bloomberg reported.

On the government’s proposition, Vermeulen noted that there are issues which might stand in the way of the country’s goals. Vermeulen stated that 1 percent of global output, or as many as 1.5 million vehicles a year production increase over the period the government anticipates is overambitious.

South Africa produced about 600 000 units in 2017, majority for export, and NAAMSA forecasts an increase to 850 000 in 2020.