A fact-based response to misleading claims about the APDP and automotive tax incentives.
A genuine leader understands the limits of their expertise. Speaking with conviction is not the same as speaking with competence. Credibility is strengthened, not diminished, when individuals recognise where specialist knowledge, evidence and technical expertise are required.
South Africa's automotive industry has long welcomed robust public debate on industrial policy. Such debate is healthy and necessary, particularly on matters that shape investment, employment, economic growth and the country's long-term industrial competitiveness. However, informed debate must be grounded in evidence, an accurate understanding of policy design and sound economic analysis.
Recent public commentary by Donald MacKay, including claims that the Automotive Production and Development Programme (APDP) represents a “R40 billion honeypot” and that abolishing the programme could reduce South Africa's VAT rate from 15% to 12%, contains material inaccuracies and misconceptions that risk misleading policymakers, investors and the public.
These assertions fundamentally mischaracterise the design, purpose and economic impact of South Africa's automotive industrial policy. They conflate customs duty rebates with fiscal transfers, treat hypothetical tax expenditures as recoverable government revenue, and overlook the measurable economic returns generated through local value addition, exports, investment and employment.
As the representative body of South Africa's vehicle manufacturing industry, naamsa believes it is both necessary and appropriate to correct the record. This statement sets out the facts, explains how the APDP operates, and demonstrates why it remains one of South Africa's most successful industrial policy instruments for attracting investment, promoting localisation, creating skilled employment and strengthening the country's export competitiveness.
Public debate should always be encouraged, but it should also be informed by evidence, sound economics and a proper understanding of how industrial policy works.
THE VAT ARITHMETIC DOES NOT ADD UP
Perhaps the most striking claim is that abolishing the APDP and automotive tax incentives would create sufficient fiscal space to reduce South Africa's value-added tax (VAT) rate from 15% to 12%. This assertion is not supported by the mathematics of South Africa's public finances.
A reduction in VAT of three percentage points would reduce one of the government's largest and most stable sources of revenue by tens of billions of rand annually. Even accepting the disputed estimate of approximately R40 billion in automotive tax incentives, the numbers simply do not reconcile with the fiscal cost of such a VAT reduction.
More fundamentally, the claim assumes that every rand associated with the APDP represents revenue that would automatically accrue to the National Revenue Fund if the programme were abolished. That assumption is fundamentally flawed.
The APDP is designed to stimulate investment, local production, exports and local value addition. Removing the programme would not result in an equivalent increase in government revenue. It would instead alter investment decisions, reduce production volumes, weaken exports, diminish corporate income tax and PAYE collections, reduce VAT generated throughout the automotive value chain, and ultimately shrink the very tax base on which the government depends.
Industrial policy cannot be assessed through static accounting alone. It must be evaluated on its net economic and fiscal impact.
Suggesting that the abolition of the APDP could directly finance a substantial reduction in VAT presents a false fiscal equivalence. It overlooks the broader economic contribution of the automotive industry and ignores the dynamic relationship between industrial investment, economic growth and tax revenue. Sound public policy should be informed by rigorous economic analysis, not by simplistic comparisons that do not withstand scrutiny.
THE APDP DOES NOT FORGO REVENUE; IT CREATES IT!
The APDP is built on a simple principle: local manufacturing creates customs duties, and local investment earns duty rebates.
South Africa applies customs duties to encourage domestic vehicle production and localisation. Under the APDP, manufacturers that invest, produce locally and increase local value addition earn rebates against those duties. The rebate is therefore not a subsidy or a fiscal transfer; it is the mechanism through which the policy rewards investment and industrial activity.
This approach is fully consistent with the World Trade Organization framework on Trade-Related Investment Measures (TRIMs) and reflects a globally accepted industrial policy practice. Automotive-producing nations around the world use combinations of tariffs, investment incentives and production-linked support to attract capital, deepen localisation and build internationally competitive manufacturing sectors.
Without local manufacturing, there would be no corresponding duties to rebate, no additional local value to reward, and significantly less economic activity to tax. The APDP should therefore be understood as an investment-led industrial policy, not as a simple cost to the fiscus.
WHY DOES THE GOVERNMENT SUPPORT THE AUTOMOTIVE INDUSTRY?
The answer is simple: because the returns far exceed the incentives.
The APDP is not designed to subsidise manufacturers; it is designed to grow South Africa's industrial economy. In 2025 alone, the automotive industry generated approximately R137 billion in audited local value addition (LVA) through domestic manufacturing, supplier development and localisation. This represents real economic value created within South Africa's borders.
The industry also exported a record R291.8 billion worth of vehicles and automotive components in 2025, accounting for 14.7% of South Africa's total merchandise exports and reaching 148 global markets.
These exports are far more than an industry success story; they are a national economic asset. Export earnings bring foreign currency into South Africa, strengthen the balance of payments, support the value of the rand, improve investor confidence and help finance essential imports such as fuel, machinery and technology.
This is precisely why governments across the world compete aggressively for automotive investment. The APDP is not simply an incentive programme; it is an investment in South Africa's manufacturing capability, export competitiveness and long-term economic resilience.
WHAT IS THE TRUE COST OF THE APDP, AND WHAT IS THE RETURN?
Critics of the APDP focus almost exclusively on its perceived fiscal cost while ignoring the economic returns it generates. That is neither sound economics nor sound public policy.
Based on the figures cited by critics, the APDP is estimated to provide approximately R35–R40 billion in duty rebates and production support. In return, the programme generated approximately R137 billion in audited LVA in 2025 alone and supported R270.8 billion in automotive exports, making the automotive industry one of South Africa's largest export earners.
Measured purely on these two indicators, every R1 associated with the APDP supports nearly R4 in domestic manufacturing value and almost R8 in export earnings. This excludes the wider economic benefits generated through employment, supplier development, corporate taxes, PAYE, VAT, technology transfer and foreign direct investment.
The real question is therefore not, “What does the APDP cost?” The more appropriate question is, “What would South Africa lose without it?”
Without a globally competitive automotive industry, South Africa would forfeit billions of rand in exports, local manufacturing output, investment and skilled employment, weakening the country's industrial base, reducing foreign exchange earnings and ultimately shrinking the national tax base. That is why the APDP should be viewed not as a fiscal cost, but as one of South Africa's highest-performing industrial investments.
OPEN INVITATION
South Africa's automotive industry has never shied away from robust debate. Indeed, constructive scrutiny strengthens public policy and improves economic outcomes. However, such debate must be informed by evidence, technical understanding and an appreciation of the complex economics that underpin globally competitive manufacturing.
The APDP is not a subsidy for a select few; it is an investment in South Africa's industrial future. It has helped attract billions of rand in investment, created significant local value addition, supported one of the country's largest export sectors, developed globally competitive supply chains and sustained thousands of skilled jobs. These are not theoretical benefits; they are measurable economic outcomes.
As South Africa competes for increasingly mobile global investment, the choice is not between supporting industry and supporting consumers. A strong manufacturing sector creates jobs, generates exports, broadens the tax base and ultimately provides the government with the resources needed to invest in education, healthcare, infrastructure and social development.
naamsa remains committed to transparent, evidence-based engagement on industrial policy. We welcome informed debate, but we equally have a responsibility to correct misinformation where it risks undermining one of South Africa's most successful industrial sectors. Facts, not misconceptions, should always guide good policy.