{"id":865619,"date":"2026-07-07T12:00:00","date_gmt":"2026-07-07T10:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=865619"},"modified":"2026-07-07T11:36:34","modified_gmt":"2026-07-07T09:36:34","slug":"just-7-companies-collect-a-r40-billion-paycheque-every-year-from-taxpayers-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/865619\/just-7-companies-collect-a-r40-billion-paycheque-every-year-from-taxpayers-in-south-africa\/","title":{"rendered":"7 companies collect a R40 billion ‘paycheque’ every year from taxpayers in South Africa"},"content":{"rendered":"\n

South Africa’s automotive industry is supported by an incentive programme worth more than R40 billion a year.<\/p>\n\n\n\n

Seven major vehicle manufacturers benefit from this through various tax breaks, rebates and grants designed to keep local production competitive.<\/p>\n\n\n\n

According to the founder and CEO of XA Global Trade Advisors, Donald MacKay, Chinese automaker Chery is now set to take Nissan’s place within this system after acquiring the Japanese company’s former manufacturing plant in Rosslyn.<\/p>\n\n\n\n

South Africa’s automotive incentives are provided through the Automotive Production and Development Programme (APDP2), which supports large-scale vehicle manufacturing and exports. <\/p>\n\n\n\n

The seven manufacturers that currently benefit from the programme are BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota and Volkswagen.<\/p>\n\n\n\n

Rather than receiving an annual cheque from the government, these companies primarily benefit through customs duty rebates, tax incentives and investment grants. <\/p>\n\n\n\n

However, the support ultimately comes at a cost to the state through forgone tax revenue and direct funding, meaning it is ultimately financed by taxpayers.<\/p>\n\n\n\n

Speaking in an interview with BizNews<\/a>, MacKay said that the subsidy programme is at the heart of manufacturing cars in South Africa. “Put differently, if you took away the subsidy, we wouldn’t make cars in South Africa.”<\/p>\n\n\n\n

The largest portion of the support comes from customs duty rebates and exemptions. Vehicle manufacturers that assemble cars locally and export them earn credits that allow them to import vehicles or components without paying the standard customs duties.<\/p>\n\n\n\n

Manufacturers also qualify for the Volume Assembly Localisation Allowance, which rewards high production volumes and greater use of locally produced components, while production incentives provide additional credits based on the value manufacturers add within South Africa.<\/p>\n\n\n\n

Unlike these tax-based incentives, the Automotive Investment Scheme provides direct cash grants. <\/p>\n\n\n\n

The government contributes up to 25% of qualifying investments in new factories, machinery, and equipment, with support increasing to 35% for electric vehicle and new-energy component projects.<\/p>\n\n\n\n

Not sustainable <\/h2>\n\n\n
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Deputy President Paul Mashatile at Chery International’s factory acquisition ceremony in Tshwane, Gauteng Province.<\/em><\/figcaption><\/figure><\/div>\n\n\n

According to the Department of Trade, Industry and Competition, the scheme has paid out more than R20.7 billion since its launch, helping attract over R76 billion in private investment.<\/p>\n\n\n\n

However, manufacturers must also meet strict conditions to qualify for the incentives, including production thresholds, employment targets and at least Level 4 Broad-Based Black Economic Empowerment compliance. <\/p>\n\n\n\n

Companies unable to meet ownership requirements can instead contribute 2.75% of their annual turnover over 10 years to the Automotive Industry Transformation Fund, which supports black-owned suppliers.<\/p>\n\n\n\n

MacKay said Chery’s decision to acquire Nissan’s former Rosslyn factory was closely linked to the availability of these incentives.<\/p>\n\n\n\n

“Chery, just like all of the other producers, is going to take full advantage of that programme. Otherwise, they would never have done the deal to purchase the Nissan factory.”<\/p>\n\n\n\n

However, he noted that calculating the exact value of the incentives each company receives is complex because they are composed of several mechanisms rather than direct payments.<\/p>\n\n\n\n

MacKay argued that the cost of maintaining the programme has become significant. “The consumer in South Africa effectively funds the subsidies,” he said. <\/p>\n\n\n\n

“We do that in a couple of ways. The one is we pay a fairly significant premium on our cars because they are made locally or even because they are imported by a local manufacturer.”<\/p>\n\n\n\n

He added that the industry also receives direct financial support from the government through grants, alongside the taxes the state chooses not to collect.<\/p>\n\n\n\n

“In the last Treasury set of numbers, we were over R40 billion a year if we combine all of the different types of subsidies for automotive, which is effectively going to seven companies,” he said. <\/p>\n\n\n\n

This amount is roughly equivalent to three percentage points of VAT, which illustrates the scale of government support for the sector.<\/p>\n\n\n\n

While he said he would prefer factories to remain open rather than close, he warned that South Africa has become less attractive for manufacturing because of infrastructure failures, unreliable logistics, and other structural problems.<\/p>\n\n\n\n

“The programme was never meant to be evergreen, whereas now it looks like it will never ever end. We’re using subsidies, tariffs, all of these things as an alternative to fixing the basics. And that simply is not sustainable,” he said. <\/p>\n\n\n

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CEO of XA Global Trade Advisors, Donald MacKay<\/em><\/figcaption><\/figure><\/div>","protected":false},"excerpt":{"rendered":"

South Africa’s automotive industry is supported by an incentive programme worth more than R40 billion a year.<\/p>\n","protected":false},"author":92,"featured_media":702685,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2074433510534701224","_sma_x_attempts":1,"footnotes":""},"categories":[4],"tags":[10479,5364,853,25759,23622],"class_list":["post-865619","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-chery","tag-nissan","tag-south-africa","tag-the-automotive-production-and-development-programme-apdp2","tag-xa-global-trade-advisors"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/865619","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=865619"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/865619\/revisions"}],"predecessor-version":[{"id":865637,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/865619\/revisions\/865637"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/702685"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=865619"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=865619"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=865619"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}