South Africa

Plan to reroute imported grey and used vehicles from Durban to Maputo underway

Imported cars

A plan by the automotive industry, government entities and JSE-listed Grindrod to shift the port of entry for imported grey and used vehicles from Durban to Maputo to prevent these vehicles from illegally remaining in South Africa is still “a work in progress”.

These vehicles are destined for South Africa’s neighbouring countries, but the estimated 30 000 used vehicles a year that illegally remain in South Africa cost the fiscus up to R8 billion a year in lost direct taxes.

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On Wednesday, Mikel Mabasa, CEO of automotive business council Naamsa, said South Africa’s automotive industry has had conversations with Transnet and Grindrod about this plan, but “it’s work in progress, and we haven’t yet finalised that completely”.

Grindrod is involved in the discussions because it manages the Maputo car terminal, apart from other terminals at this port.

Mabasa said Grindrod has indicated that it is comfortable taking over the receipt of these used vehicles from Durban.

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He indicated that they are hopeful that a final agreement on the plan “could possibly happen once the election dust has settled” in the second half of this year.

Logistical issues

A key part of the problem is that these imported used vehicles enter the country via Durban for transshipment to neighbouring countries, but many end up not leaving South Africa.

Mabasa said a number of logistical issues have to be addressed before an agreement can be reached.

“We are looking at all the logistical issues because we also need to have conversations with shipping lines because they put all these vehicles into their ships.

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“Sequencing of such needs to be aligned very carefully so that, as these vehicles leave their countries of origin, they [shipping lines] know exactly where they are going to be docking.

“There is a lot of work behind the scenes that is still required,” he said.

‘Importers will have to comply’

Mabasa indicated that stopping importers from using Durban as the port of entry for these used vehicles would not be a problem.

He stressed that each and every country has its own rules and regulations and once South Africa has taken the decision that it will no longer be receiving used vehicles, importers will have to comply with that decision.

Mabasa added that once the South African government makes that decision, it will speak to the SA Revenue Service (Sars) because the customs duty division processes all these vehicles.

Naamsa last year escalated South Africa’s growing illegal vehicle importation problem to the International Organisation of Motor Vehicle Manufacturers (OICA) in an attempt to halt the flow of these vehicles from the countries of origin.

Mabasa stressed on Wednesday that the intention of doing this is to bring this problem to the attention of OICA and make it aware that South Africa and the rest of the African continent do not want used vehicles dumped on the continent because of the huge impact these vehicles have on the safety of consumers and the environment while also denying African governments much-needed tax revenue.

He said the best-case scenario is for all the countries of origin of these used vehicle imports to stop exporting them.

“I am encouraging them [OICA) to encourage all the countries of origin to scrap those vehicles and use that scrap and recycle that scrap so that it can reuse some of that scrap for the manufacturing of components and other vehicles,” he said.

Impact goes beyond taxes

Kia South Africa CEO Gary Scott last month told an AutoTrader dealer convention that although South Africa has outlawed the importation of used vehicles, about 30 000 illegal used car imports, often referred to as ‘grey imports’, leak into the country.

Scott said these vehicles come from countries that import second-hand vehicles, such as South Africa’s landlocked neighbours Botswana, Lesotho and Eswatini (previously named Swaziland).

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He said that by circumventing official channels, illegal used car imports evade taxes and duties, leading to revenue loss for the government and unfair competition for local dealerships and manufacturers.

The influx of illegal used car imports also negatively impacts local car market sales, undermines local manufacturing, technological innovation and job creation, and aids criminal activity.

Cheap, but not worth the headache

Consumers are lured into buying these illegally imported used cars because they are cheaper than legally sold vehicles.

But Mabasa warned that illegal used car imports are often very old and may not meet local regulations and safety standards, potentially endangering motorists and other road users.

Mabasa said multiple stakeholders, including Sars, the Department of Transport, the SA Police Service (SAPS), and metro police, need to come to the party to resolve the issue.

Buyers of these illegally imported vehicles also face challenges in obtaining warranties, spare parts and after-sales service.

Scott warned that buyers also “run the risk of the car being impounded and destroyed”.

However, identifying an illegally imported used car is not simple unless it displays a foreign number plate.

AutoTrader CEO George Mienie said South Africa does not have ‘metadata’ that is structured to identify these illegal used vehicle imports.

Mienie said this led AutoTrader to take it upon itself to build a VIN database with the intention of identifying these illegal imports.

“At a minimum, this ensures transparency for the consumer,” he said.

This article was republished from Moneyweb. Read the original here