UCT academic David Kaplan has questioned the success of the MIDP, saying that while the motor industry made progress in boosting exports, the benefits had not come from a rise in the sector's competitiveness. Is this an overly pessimistic view?
UCT academic David Kaplan has questioned the success of the MIDP, saying that while the motor industry made significant progress in boosting exports, the benefits had not come from a rise in the sector's competitiveness. Is this an overly pessimistic view?
Kaplan, a former chief economist at the Department of Trade and Industry, was speaking at a conference hosted by Trade and Industrial Policy Strategies and UCT's Development Policy Research Unit on Monday. He argued that South Africa's manufacturing performance since the 1990s has been below par and the trade and industry department's incentive strategies to boost the sector have not been effective.
He downplayed the success of the department's incentive policies, such as the motor industry development programme (MIDP).
He added that manufacturing employment had been declining since 1995, despite a rise in output in the sector. And while the automotive industry had made significant progress in boosting exports, “productivity in the sector was only slightly higher than other local manufacturing sectors,” quoted him as saying.
"If we look beyond the export figures, is it the success it has been made out to be?" asked Kaplan.
He suggested the export growth in automotive and vehicle components was underpinned by the import rebate certificates manufacturers received as a result of the MIDP. These certificates or credits allowed the manufacturers to import cars and components duty free based on the number of exports.
Imported cars are then sold to consumers at prices which include the tariffs, “which in effect means consumers are subsidising the export of motor vehicles,” Kaplan added.
However, Kaplan said the department's motor industry development programme should not be scrapped, but that the "issue needs further unpacking".
In reaction, a trade and industry official said Kaplan had painted an overly pessimistic picture of the car industry's performance and said there had been significant knock-on benefits in related industries as a result of the export growth in vehicles.
Original article from Car