The South African government vehicle fleet must be local

Abstract

South Africa is fast approaching a “fiscal cliff” owing to rising government expenditure on civil service remuneration, social security grants and interest payments on government debt. The fiscal cliff is defined as the point where civil service remuneration, social security grants and interest payments on government debt account for 100 per cent of government tax revenue. Currently these three items account for some 70 per cent of the government’s tax revenue. The South African government has already increased the value-added tax (VAT) rate from 14 per cent to 15 per cent, but a reduction in government expenditure must also be considered to avert the fiscal cliff. Unnecessary government expenditure must, therefore, be identified and eradicated. One example where savings can be recorded is expenditure on imported vehicles purchased for the government vehicle fleet at central and provincial government level. These vehicles can easily be substituted by the purchase of locally-produced vehicles. Research in this paper shows that a policy of exclusive purchases of locally-produced vehicles for the government fleet at central and provincial government level would (based on 2017-figures) lead to fiscal relief, higher employment in the automotive manufacturing sector and a once-off positive economic growth impact for the South African economy. This matter has also found some support amongst members of Parliament.

Keywords: South African automotive industry; South African government vehicle fleet; economic stimulus; fiscal cliff; trade balance; economic growth