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Why is SA shaken by Peugeot’s Namibian plant?

2018-12-12  Toivo Ndjebela

Why is SA shaken by Peugeot’s Namibian plant?

WINDHOEK – The National Association of Automobile Manufacturers of South Africa (Naamsa) has been on a warpath against the establishment of a Peugeot plant in Namibia, saying this development is potentially in breach of regional trade rules.

The plant, known as Peugeot Opel Assembly Namibia, is a joint venture between French company Groupe PSA who own 51 percent, and Namibia Development Corporation (NDC), a wholly state-owned Namibian company which holds the remaining 49 percent.

Naamsa specifically cited  the Southern African Customs Union (Sacu) whose rules it believes are potentially being violated by the Walvis Bay-based plant – especially those on import duties.

Namibia on the other hand has denied any wrongdoing, leaving the obligation to prove any infringements squarely on the shoulders of the whining South African motoring industry.

The Permanent Secretary in Namibi’as Ministry of Industrialisation, Trade and SME Development, Dr Michael Humavindu, says he was not aware of any infringement emanating from the country’s first ever car-assembly factory.
“We would like the South African motoring industry to confirm their facts and verify that the assembly plant breaches Sacu regulations,” Humavindu told New Era.

“They must make their case to South Africa’s department of trade and industry and their government will communicate with the Namibian government. We cannot respond to an industry.”

Nico Vermeulen, Director of Naamsa, told CNBC Africa news network on Monday this week that the Peugeot deal in Namibia needs further clarification.

Last week, he was widely quoted in other media platforms as saying more explanation was needed. 
Humavindu charged that the media reports questioning Namibia’s compliance with regional trade protocols were “written to cause consternation.”

But Vermeulen disagrees, telling CNBC Africa: “We were not well informed about the basis on which the Peugeot [was set up]. We’ve since received information that substantially clarifies the position.” He said on Monday during a telephonic interview with CNBC Africa. 

“I wouldn’t say it’s tension between Naamsa and the Namibian government [as hinted in the media]. It’s more of a question of informing the other,” he continued.

“They (Peugeot in Namibia) are entitled to duty-free access to the South African market, provided they complied with customs and excise regulations as they apply in Sacu.” 

He charged that Peugeot is importing parts that are then all put together to assemble vehicles, in a manner that circumvents Sacu’s import duties.

“Our information at this stage is that the vehicle plant in Namibia is a semi-knockdown assembly facility.”
“The other alternative, is a complete knockdown assembly facility – which is a high capital investment. Semi-knockdown, or SKD, is lower capital investment and the alternative to SKD manufacturing or CKD (complete knockdown) manufacturing is full importation.”

The Walvis Bay facility assembles imported car kits from France and Germany.
“Now, the import duties from Europe, the EU, of parts entering Sacu, for which Namibia is part, is 18 percent. Our understanding is that the Peugeot operation in Namibia is bringing in 55 different types of automotive components and then assembling that into a final vehicle,” Vermeulen said.

“Then they’ll pay duty on those components of three to five percent instead of 18 percent duty. So it’s a way of gaining a foothold in the market on a very cost-effective basis.”
He said Peugeot should have set up a plant in South Africa instead.

“If they had so wished, Peugeot could have started a semi-knockdown operation in South Africa, close to the main market. There are various other companies that are producing low volumes on the same basis.” 

“SKD is normally a fairly low volume type of manufacturing activity. Peugeot in Namibia have mentioned that they intend to produce 5000 vehicles per annum and the minimum volume that apply in South Africa for a CKD plant – in terms of automotive production – is 50 000 units per annum.” 

“And most models produced in CKD, complete knockdown, in South Africa is around 80 000 to 100 000 units per model. This gives a bit of perspective in terms of the range of volumes of production,” he concluded.
Humavindu said the Walvis plant is Namibia’s contribution to integration in both Sacu and Sadc.

The Peugeot plant will eventually be inserted into the regional value chain, with the possibility of different components in the assembly process being sourced from within the region, particularly from South Africa, Humavindu said. 
“We are all promoting the Airbus business model that sources components from all over the world in the assembly of their aircraft. This type of business model will ensure that we achieve regional integration,” said Humavindu.  

He continued that with the African Continental Free Trade Area (AfCFTA) gaining momentum, also having recently been ratified by South African lawmakers, both Sadc and Sacu need to be prepared to compete not only regionally but also avoid losing out to the other regional economic blocks on the continent and throughout the globe. 
– Additional reporting by Edgar Brandt

2018-12-12  Toivo Ndjebela

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