We're thrilled to let you know that the long-awaited Automotive Production Development Programme Phase 2 (APDP2) regulations were published in the Government Gazette dated 11 February 2021. The APDP2 regulations were originally expected to have come into effect on 1 January 2021. However, they were delayed for implementation effective from 1 July 2021. Minister Patel signed the APDP2 Regulations on 4 February 2021 allowing for the regulations to be published in last week's gazette.

The published regulations did not include any of the information documents that accompany the regulations. These are expected to be released shortly. The operational detail lies in these documents. We will update you on developments in this regard as soon as the information becomes available.

B-BBEE compliance requirements remain unchanged from the draft regulations. However, the gazetted regulations do not provide clarification in respect of the exact B-BBEE compliance levels, despite assertions in the press of Level 6 for 2022 and Level 4 for 2023. We expect the Minister will clarify these details in due course, particularly in regard to the time-frames for implementation of minimum compliance levels.

The major changes and differences from the draft APDP2 Regulations published for comment in July 2020 are:

1. Motorcycles have been removed from the regulations in their entirety and all reference to rebate item 317.01 has been removed.
2. Definitions which have been included that did not appear in the draft guidelines:

   1. “Environmental levy”: defined as the levy on tyres manufactured in South Africa under rebate item 152.00 in Section E of Part 3 of Schedule 1 to the Customs Act.

   2. “Non-standard material(s)”: defined as any imported component, and/or raw material or component other than the defined standard material used in the manufacture of any qualifying or eligible product.

   3. “Semi-knock down”: defined as a vehicle manufactured to an untrimmed-painted-body condition with no parts assembled to the body.

3. The definition of standard materials has been expanded to include a specification stipulated in Info Doc A, Note 4.4. The information documents have not been released and further detail on the contents of Note 4.4 cannot thus be provided as yet.

4. In Part B – General Provisions: Clause 3, “Applicability of the Regulations” has been added. This clarifies that if there is any discrepancy or inconsistency between the regulations and the information documents, the regulations shall trump the info documents. This provides clarity with regards to the treatment of conflicts.

5. Eligible Products has been expanded to include the manufacture of vehicle kits for assembly outside South Africa to qualify for the Production Incentive benefit. This is a totally new addition to the programme.

6. The sunset date for the Annual PI Factor for Component Manufacturers has been removed, which sees the alignment with the Annual PI Factor time-frame for assemblers.

7. The reduction by 20% of component PRC values has been removed. This is a deviation from the APDP Phase 1, where component PRCC values were reduced by 20%.

8. In the Transitional Notes, the Company Specific Percentage for VALA for Quarter 3 2021 will be determined and based upon Quarter 4 2020. Quarters 1 and 2 of 2020 are not included in the baseline calculation.

Should you have any queries or require assistance with the published APDP2 regulations, please contact Cova Advisory & Associates on 011 568 3350 or email us using the details below.

Kind regards,

Duane Newman
dnewman@cova-advisory.co.za

Dylan Jessup
djessup@cova-advisory.co.za

Cova Advisory