Bell concerned by prospect of losing MIDP benefits
Bell concerned by prospect of losing MIDP benefits
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US order depends on outcome of negotiations
Trade and Industry Editor
EARTHMOVING equipment manufacturer Bell Equipment will stop benefiting from SA`s increasingly controversial Motor Industry Development Programme (MIDP) in July unless the company manages to convince government otherwise.
Bell CE Gary Bell said yesterday that government had notified the company that it would no longer be able to use the programme from July.
The company said a large US export order and the promise of new jobs now hinged on the outcome of negotiations that Bell had entered into with government in a bid to retain its programme benefits.
The notice to Bell follows complaints by rivals that Bell`s inappropriate use of the programme gave the South African company an unfair advantage over competitors. Caterpillar insisted the development programme was aimed at cars and other `on-highway` vehicles not the earthmoving vehicles that Bell manufactured.
Bell`s benefits through the development programme totalled about R30m last year, said the CE yesterday. The company`s revenues in this period came close to R3bn.
Under the programme, government rewards vehicle manufacturers for exports of locally made vehicles and other automotive products by giving them discounts on the cost of imports.
The programme has also raised the ire of others.
The Australian government is considering lodging a complaint with the World Trade Organisation about the programme, which is seen by some as a form of subsidisation .
Bell said the company was in discussions with government to explore the possibility of continuing to use the programme. `After all, we are making vehicle products and exporting them, which is what the MIDP is designed for,` he said .
`We can survive without the programme it is not that critical,` he said.
A US contract worth about R150m depends on on whether or not Bell will be able to use the programme, however.
`There is a big order in the latter part of the year if the MIDP is in place,` said Bell . The order could generate more than 200 jobs at the company.
Bell said his company reinvested `every cent` of the programme`s benefits in activities such as market development.
The loss of benefits would have a significant impact on the company`s profits, but shutting down its South African manufacturing was not a consideration, he said.
The earthmoving equipment manufacturer is already smarting from the effects of the strong rand, which prompted it to move some of its manufacturing operations to Europe last year.
The assembly line in Germany, commissioned in September, is almost operating at full capacity. Bell said the move to Germany had given the company more flexibility. If the rand strengthened further, the company would move more operations offshore, he said.
May 20 2004 07:14:22:000AM Carli Lourens Business Day 1st Edition
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