Trade, Industry and Competition (dtic) Minister Parks Tau has announced that South Africa will phase out current Semi-Knock-Down operations and will no longer provide policy support for any new SKD facilities in the country.
SKD operations refer to a manufacturing and export method where products - most commonly vehicles or major equipment - are shipped to a destination market in a partially disassembled state and finished at a local assembly facility.
Speaking at the SA Auto Week event in Durban on Thursday, the Minister said this decision comes as the government, working with the Automotive Business Council, the National Association of Automotive and Component and Allied Manufacturers (Naacam) and organised labour unions, reviews the Automotive Production Development Programme (APDP2).
As part of this process, and informed by engagements with industry stakeholders, an APDP modelling study has been undertaken to review the programme and identify possible short-term interventions to enhance the competitiveness of domestic vehicle manufacturers in relation to importers of fully built units.
Tau explained that this development will exclude Medium and Heavy commercial vehicles.
“We will work to strengthen the legal definitions around what we determine as Complete-Knock-Down (CKD) manufacturing. We have agreed that the strategic competitiveness of South Africa’s ladder frame of the Light Commercial Vehicle (LCV) segment warrants formal investigation.
“There was also alignment that any additional protection should be accompanied by reciprocal commitments relating to production, localisation, employment, transformation, exports, and investment. I will be instructing the International Trade Administration Commission of South Africa (ITAC) to undertake this investigation to reach a final determination on the matter,” he said.
According to the Department of Trade, Industry and Competition, the proposed interventions include the following:
- A review of the ad valorem tax structure to create clearer differentiation between locally produced and imported vehicles. This may involve adjustments to the tax base and the local adjustment factor to support domestic production competitiveness.
- Measures to address structural imbalances within the APDP, particularly regarding the operation and accumulation of Production Rebate Certificates (PRCs), to strengthen localisation incentives.
- Consideration of revisions to the Volume Assembly Local Allowance (VALA) parameters to better align incentives with broader industrial policy objectives.
- Regulatory refinements related to Semi Knocked Down (SKD) operations, including the introduction of potential time-bound provisions to encourage a transition towards higher-value Complete Knocked Down (CKD) production.
The Minister acknowledged that the current period is the greatest turning point this sector has faced in a century, and the way vehicles are powered, built, owned and used is changing all at once.
He further indicated that New Energy Vehicles and South Africa’s commitment to carbon emission targets, as well as the Critical Minerals Beneficiation Strategy, are key focus areas in placing the sector on a path to success.
“If we do not build the vehicles that markets such as Europe and the United Kingdom will buy, we will lose those markets, and with them our plants and our jobs. At home, in the first seven months of this year, South Africans bought almost as many new energy vehicles as in the whole of last year.
“The automotive industry is where the beneficiation strategy meets our reindustrialisation programme. Every new energy vehicle sold today will one day reach the end of its life, and so will its battery.
“Government has begun work on an End of Life Vehicle policy, as part of the decarbonisation pathway in our Industrial Development Strategy. Recycling batteries and giving them a second life is a new industry in its own right. South Africa intends to build it from the start,” Tau said. -SAnews.gov.za
