Investment commitments worth R15-billion made by car makers and component producers in 2010 represented the main highlight of South Africa's second industrial policy action plan, or Ipap2, the implementation of which began in April, Trade and Industry Minister Dr Rob Davies has argued.

Speaking at a media networking session, he indicated that government would now seek to make similar progress in encouraging localisation around South Africa’s R800-billion-plus infrastructure investment programmes. Such progress would be underpinned by a new procurement regime, which would be unveiled in 2011.

International automotive companies have announced five separate investments into the South African industry with a cumulative investment value of R11-billion. The initiatives would also generate some 2 500 new jobs.

A further R4-billion worth of component investments were also unveiled during the year, which could yield some 20 000 jobs.

Commitments had been received from BMW South Africa, Ford Motor Company Southern Africa, Volkswagen South Africa, General Motors South Africa and, most recently, from Mercedes-Benz South Africa, which was awarded a contract in December to produce the next generation C-Class at its East London plant, in the Eastern Cape, where production would start in 2014.

Davies argued that the architecture of the Automotive Production Development Programme (APDP), which provides support for higher volume production, as well as higher levels of local content, was starting to deliver the desired outcomes. The APDP would replace the Motor Industry Development Programme in 2012.

He added that the R2,7-billiion automotive investment scheme (AIS) had been specifically designed to support government’s volume and local-content aspirations.

Launched in June, the AIS forms part of the APDP and extends a taxable cash grant of 20% of the value of qualifying investments in productive assets.

To qualify, a light motor vehicle manufacturer has to introduce a new or replacement model for production, and demonstrate that it will achieve a minimum production of 50 000 units a year within a ramp-up period of three years. A component manufacturer has to prove that a contract has been awarded for the manufacture of components to supply into the light motor vehicle manufacturing supply chain, and that the investment will achieve at least 25% of total entity turnover from the light motor vehicle manufacturing supply chain.

An additional taxable cash grant of 5% or 10% over and above the 20% taxable cash grant was available to projects that demonstrated that the investment would result in base-year employment levels being maintained throughout the incentive period and, in the case of light motor vehicle manufacturers, that these levels would be maintained during the model phase-out period.

Davies said that an updated Ipap2 implementation plan for the 2011 to 2014 fiscal period would be delivered early next year and would seek to address some of the implementation shortcomings that emerged in 2010.

A key feature of the updated version would be a new procurement framework for public entities to encourage higher levels of local content in the infrastructure programmes currently being pursued.

The Department of Trade and Industry, the Economic Development Department and the National Treasury were developing this framework collectively.

The objective would be to promote industrial development around the infrastructure programmes and to ensure that the localisation benefits, which had hitherto been near absent from the rollout, were more comprehensively captured.