South African Motor Industry Policy in the Cloud of Uncertainty

The complexity of the system of incentives and uncertainty surrounding the nature of relationships between policy variables in South Africa's motor industry tend to discourage policymakers from making large changes. This is particularly true if recent industry performance has been relatively good. However, there has been a major shift in thinking, from the conventional view that motor industry policy was too inward-looking to one marked by fear that policy has gone too far in the other direction, encouraging heavy reliance on exports of completely built up vehicles (CBUs) and components. An alternative view is that the rapid growth of CBUs is absolutely essential for the future growth of output of the industry, and that there should be no further reduction in the incentive to export provided by the current policy regime.

The study begins by reviewing the history of the motor industry, and describes the system of incentives provided by the MIDP policy framework. The performance of the motor industry under the MIDP is then assessed. Next, the paper considers the outlook for the growth of output and exports in the light of changes in key parameters of the MIDP. It highlights fundamental problems in the MIDP framework, and concludes by suggesting that alternatives to the MIDP should be considered as a matter of urgency.

  • Authors: Trevor Bell
  • Year: 2003
  • Organisation: The National Union of Metal workers of South Africa (NUMSA)
  • Publisher: NUMSA
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