South Africa Readies Plan to Extend Automotive Sector Support

  • Trade department sets up team to develop post-2020 master plan
  • Efforts form part of industrial plan to boost economy

South Africa is working on a plan to extend support for the automotive industry beyond the current 2020 timeframe and expand the scope of the policy, the Department of Trade and Industry said.

It has set up a team of technical experts to develop a post-2020 Automotives Master Plan that will examine the entire industry and include light, medium and heavy vehicles and motorcycles, Trade Minister Rob Davies said Monday. South Africa’s current incentive and benefit program has attracted companies including Ford Motor Co., BMW AG, and Volkswagen AG to set up factories and create jobs in the country, where unemployment is almost 25 percent.

The effort forms part of the government’s latest Industrial Policy Action Plan, which also includes steps to improve buying of local products by government departments, develop labor-intensive businesses and increase industrial financing and incentives including stronger export-credit and export credit insurance support, Davies said. The initiative includes a program to promote the use of natural gas as both a source of power generation and a driver of industrial diversification, hesaid.

South Africa is seeking to restore policy credibility after President Jacob Zuma sent the rand and bonds reeling when he unexpectedly fired Nhlanhla Nene as finance minister in December and replaced him with a little-known lawmaker, only to backpeddle on the decision days later by hiring Pravin Gordhan to the post he held from 2009 to 2014.

Both the National Treasury and South African Reserve Bank forecast the economy will expand less than 1 percent this year, the slowest pace since 2009, as depressed commodity prices and low demand from major export markets weigh on output.

Business leaders have been meeting with Gordhan this year to come up with measures to boost the economy.

Companies including Cheniere Energy Inc., a Houston, Texas-based liquefied natural gas producer, have shown interest in South Africa’s plan to supply 3,126 megawatts of gas-fired generation. The gas-to-power program will create a market for the potential supply of domestic gas in a country that last year suffered about 100 days of scheduled cuts in an electricity crisis that has curbed growth in the continent’s most industrialized economy.

The plan also intends to benefit from the weaker rand, helping make products manufactured in the country more globally competitive and creating an opportunity to develop factory plants. The currency has depreciated 24 percent against the dollar since the start of 2015.

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