The Minister of Trade, Industry and Competition, Parks Tau, stated on Thursday that the government will cease providing political support to car manufacturers who import nearly finished vehicles for local assembly, as the program underpinning the country's automotive industry is being reviewed.
Speaking at the South African Auto Week event, Tau announced that the government has agreed to phase out activities based on the import of body shells and most components in kit form, known as Semi Knocked Down (SKD) assembly. Furthermore, the government will not provide political support to new facilities.
This shift aims to encourage manufacturers toward deeper local production and the sourcing of local suppliers. South Africa's automotive plan targets increasing the local content share to 60% from the current 38%, doubling employment in the sector, and raising South Africa's share of global vehicle output to 1% by 2035.
Tau clarified that this change does not apply to medium and heavy commercial vehicles. Additionally, authorities will tighten the legal definition of what constitutes Completely Knocked Down (CKD) production, where cars are assembled on-site from individual parts rather than from near-finished kits.
The Minister also noted that the government will consider the need for additional support for the light commercial vehicle segment with a 'frame structure,' which includes pickups. He has instructed the International Trade Commission (Itac), which sets import tariffs, to conduct an investigation before making a final decision.
He added that an agreement was reached that any additional protection must be accompanied by mutual commitments regarding production, localization, employment, transformation, exports, and investment.
The 'Loopholes' Issue
The government, in collaboration with the industry body Naamsa, the component manufacturers association Naacam, and organized labor, is reviewing the Automotive Production and Development Programme—a system of incentives for the sector. This review followed calls from automakers to change policies and provide incentives that would promote deeper production and protect local manufacturers from imports.
Earlier this year, CEO of BMW Group South Africa, Peter van Binnsbergen, stated that the industry had strongly urged the government to close what he called a 'loophole' in the SKD system. Van Binnsbergen noted: 'SKD manufacturers arrive almost duty-free because they use after-sales categories to import engines without duties, for example, and they really have very little presence here in South Africa, creating no investments and barely creating jobs.'
CEO of Toyota South Africa Motors, Andrew Kirby, stated in July that the country's automotive sector had moved beyond the need for SKD operations, warning that assembling cars from kits threatens to undermine larger investments in full-scale production. Kirby emphasized: 'Therefore, our persistent request is to stop SKD in South Africa and strengthen CKD competitiveness so that we can achieve a better balance between locally produced and imported vehicles.'