The future of the state-assisted Motor Industry Development Programme could be threatened after it emerged that government has agreed to reduce MIDP benefits for companies exporting leather goods to Australia.

The future of the state-assisted Motor Industry Development Programme could be threatened after it emerged that government has agreed to reduce MIDP benefits for companies exporting leather goods to Australia.

A memorandum of understanding signed between the South African and Australian governments will result in the scrapping of export benefits to automotive leather suppliers to Australia, and could limit these imports to other markets by January next year.

Motor industry analyst Tony Twine told that South Africa had been bullied into the decision after Australia again threatened to take the MIDP before the World Trade Organisation (WTO). Twine warned that, had this happened, the WTO could have “completely demolished” the programme.

Last year, General Motors’ Austalian subsidiary, Holden, switched from buying leather trim from an Australian company to a South African supplier, prompting the company that lost the contract to lodge a complaint with Australia's government.

The Australian government then threatened to bring the MIDP before the WTO and there were fears that the programme might be scrapped because it was seen as a form of subsidisation, which is in contravention of the WTO’s laws.

The MIDP remains crucial to the local industry’s survival, as many of the manufacturers and component producers are not globally competitive without government’s support. Twine said he believed that the South African government had given in to Australia’s demands since leather goods had a marginal contribution to the export figures.

Clive Williams, the executive director of the National Association of Automotive Component and Allied Manufacturers, said the limited assistance to automotive leather exports from next year would result on suppliers not entering into new contracts until the limitation was clarified.

But Twine also said it would be increasingly difficult for other governments to continue to undermine the MIDP’s efforts, since the programme goes under review this year. The programme has recently been heavily criticised, not only by Australia, but also by local labour unions accusing the vehicle industry of benefiting from the programme while core goals, such as job creation, have not been adequately addressed.

Original article from Car