Car makers welcome move to curb ‘grey imports’

The National Association of Automobile Manufacturers of South Africa (Naamsa) has welcomed the R1.8 billion allocation in the budget towards curbing grey imports and illicit cross-border activities.

Naamsa CEO Mikel Mabasa said on Thursday that grey imports have a massive negative impact on the automotive ecosystem in South Africa and cost the fiscus an estimated R3.8 billion annually in uncollected taxes.

Mabasa added that more than 300 000 of the 12.7 million cars on South African roads are grey imports and this figure is growing by 30 000 vehicles per annum.

“Unquestionably, this displaces new car sales and harms the country’s economy,” he said.

Finance Minister Tito Mboweni said in his budget speech on Wednesday that the SA Revenue Service (Sars), SA Reserve Bank and the Financial Intelligence Centre (FIC) are working jointly on combating criminal and illicit cross‐border activities through an inter‐agency working group.

Investigations and operations

Mboweni said this group has completed 117 investigations and found R2.7 billion for South Africa’s fiscus.

He said customs and excise operations are reducing the illicit movement of goods across borders, assisted by specialised cargo scanners, resulting in 3 393 seizures valued at R1.5 billion for the fiscal year to January 2021.

Mabasa told Moneyweb in December 2020 that Naamsa’s estimates of the 300 000 illegal vehicles in South Africa and the 30 000 a year increase in these illegal vehicles on the country’s roads was based on data obtained from a company in Durban it has commissioned to do this work on Naamsa’s behalf, and on police statistics.

He said the majority of these illegal vehicles entered South Africa through the port of Durban and were for transhipment to landlocked neighbouring countries, such as Botswana, Eswatini (Swaziland) and Lesotho, but never ended up in those countries.

Mabasa said on Thursday that based on the suite of taxes applicable to new car sales locally, Naamsa estimates that the impact of grey imports is costing the fiscus R3.8 billion per annum but that “this grows to over R4 billion when you consider the taxable income on corporate profits in the value chain”.

Additional impact

“Grey imports within the automotive industry do not only rob the fiscus of much-needed revenue but also hurt job creation prospects for many young people who are currently unemployed in our country.

“The importation of these illegal second hand vehicles also aids criminal activity in the country and undermines road safety initiatives,” he said.

Mabasa said to put the grey import challenge into perspective from a business viewpoint, the average monthly new vehicle market for 2020 was 28 500 units and grey imports represent an extra month’s sales a year.

“Effectively, grey imports represent 7.5% of the total market and would be the third largest brand in South Africa by volume,” he said.

Balancing act

Mabasa said Mboweni faced the difficult task of balancing economic stability and the reality of an eroded tax base, escalating debt to GDP, and struggling consumers and businesses.

He said the budget announcement of a R791.2 billion investment in infrastructure, supported by the government’s commitment to establishing Special Economic Zone (SEZ) industrial bases, will boost economic activities, industrial performance and address the widening infrastructure deficit.

Mabasa said that in line with the country’s aspirations, the automotive sector has announced a range of investment opportunities to boost South Africa’s manufacturing capacity.

He said some of the automotive investments announced recently by President Cyril Ramaphosa during his State of the Nation Address included Toyota’s first production of hybrid vehicles in South Africa, local production of Nissan’s Navara and Isuzu’s D-MAX bakkie, and investments by Mercedes-Benz.

In addition, the Ford Motor Company has announced a R16 billion investment, which will create 1 200 jobs in the coming years, he said.