naamsa Fires Back at Donald MacKay: ‘Simplistic Arithmetic’ Threatens South Africa’s Automotive Industrial Base
In a sharply worded rebuttal that marks an escalation in the public debate over South Africa’s industrial policy, naamsa (The Automotive Business Council) has slammed recent criticisms of the sector’s incentive structures as “fundamentally flawed” and “misleading.”
The council’s response follows high-profile public commentary by Donald MacKay, Chief Executive Officer of XA Global Trade Advisors, who recently critiqued the sustainability of the state’s automotive support models on SAFM. MacKay labelled the state’s multi-billion-rand support package a “R40 billion honeypot” and asserted that abolishing the Automotive Production and Development Programme (APDP) could hand the National Treasury enough fiscal runway to drop South Africa’s VAT rate from 15% to 12%.
Unwilling to let the narrative stick, naamsa fired back today, accusing MacKay of substituting standard economic logic with “static accounting” and “simplistic comparisons.”
The VAT Debate: ‘Arithmetic Does Not Add Up’
At the centre of naamsa’s retaliation is a direct deconstruction of MacKay’s VAT claim. The council argues that suggesting an automotive-incentive cut could fund a 3% national VAT drop is structurally impossible under the mathematics of South Africa’s public finances.
More crucially, naamsa points out that MacKay’s logic treats hypothetical tax expenditures as recoverable cash.
“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,” naamsa stated.
The council warned that dismantling the APDP would trigger a dynamic economic contraction:
- Shifting Investment: Original Equipment Manufacturers (OEMs) would divert capital away from local plants.
- Shrinking Tax Base: Lowered production would slash corporate income tax, PAYE collections from retrenched assembly workers, and the downstream VAT generated across the automotive supply chain.
‘The APDP Does Not Forgo Revenue, It Creates It’
Addressing the charge that the automotive sector is heavily subsidized at the taxpayer’s expense, naamsa clarified the mechanics of the APDP policy design. The framework relies on a system of import duty rebates linked directly to local investment—a standard mechanism used globally and aligned with World Trade Organisation (WTO) rules.
“The rebate is not a subsidy or a fiscal transfer; it is the mechanism through which the policy rewards investment and industrial activity,” naamsa noted. “Without local manufacturing, there would be no corresponding duties to rebate… and significantly less economic activity to tax.”
The Hard Numbers: Measuring the Return on Investment
To counter the narrative of the sector being an economic drain, naamsa anchored its defence in audited data from the 2025 fiscal year. The body positioned the automotive sector as one of the country’s highest-performing national assets.
| Key Metric (2025) | Financial Value | Macroeconomic Impact |
|---|---|---|
| Local Value Addition (LVA) | R137 Billion | Audited economic value retained entirely within SA borders through local production. |
| Automotive Exports | R291.8 Billion | Reached 148 global markets, accounting for 14.7% of SA’s total merchandise exports. |
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According to naamsa’s multipliers, utilising MacKay’s own estimated R35–R40 billion framework yields a stark cost-to-benefit ratio:
- Every R1 linked to the APDP supports nearly R4 in domestic manufacturing value.
- Every R1 generates almost R8 in vital foreign exchange earnings, which naamsa notes is critical for propping up the balance of payments and defending the value of the Rand.
A Warning on Mobile Global Capital
Concluding its briefing, naamsa extended an “open invitation” for robust, evidence-based debate but warned that mischaracterizing the sector risks spooking international investors at a time when capital is highly mobile.
With automotive nations like Thailand, the US, and the EU aggressively ramping up production-linked incentives, naamsa argues that South Africa cannot afford to unilaterally disarm its cornerstone manufacturing sector.
“The choice is not between supporting industry and supporting consumers,” the statement concluded. “A strong manufacturing sector creates jobs, generates exports, broadens the tax base, and ultimately provides government with the resources needed to invest in education, healthcare, and infrastructure.”
