South Africa has a big illegal car import problem – This is the plan to fix it

South Africa has a big problem with illegal car imports, which is costing the local industry billions of rands every year.

It is estimated that around 30,000 used vehicles are illegally brought into South Africa annually leading to a loss of revenue and diluting the market for legitimate dealerships.

Grey imports

At the recent AutoTrader Dealer Convention, CEO of Kia South Africa Gary Scott spoke about the issues that illegal used cars (otherwise known as ‘grey imports’) present to the industry.

“Many South Africans don’t know that used vehicles may only be imported under specific exemptions and only after a successful application to the authorities,” he said.

“Foreign-plated cars can only be driven by their foreign owners themselves, during the visit period”.

The majority of grey imports are brought across the country’s land borders from neighboring landlocked regions like Botswana, Lesotho, and Eswatini where it is a much more common practice to bring in used models.

This method is commonly used to circumvent official taxes and duties on new vehicles, leading to a substantial loss of revenue for the government estimated at between R5 billion and R8 billion per year.

Furthermore, the influx of cheap pre-owned autos creates unfair competition for the nation’s network of dealerships and original equipment manufacturers, according to the Automotive Business Council (Naamsa).

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

It is noted that local motorists, who are increasingly price-conscious in the face of new-car stickers, are unlikely to care much about the loss of revenue, but there are other dangers associated with grey imports.

“Price is the illegal import’s lure as these illegally imported used cars generally come with a lower price than legally sold vehicles. But there’s a price to pay for buying cheap,” said Naamsa.

Grey imports are often cheap because they are old and may not be up to local regulations and safety standards, putting the lives of the occupants as well as other road users at risk.

They also do not come with warranties or after-sale support and finding spare parts may prove to be an issue.

Potential solutions

These illegal cars are also difficult to identify unless they have a foreign licence plate, but local companies are coming up with solutions to combat the problem.

Several companies and organizations including SAIA (South African Insurance Association) and AutoTrader have built VIN (vehicle identification number) databases of South Africa’s cars, making it easier to identify when a foreign one is picked up in our borders.

This also helps to safeguard consumers against dodgy purchases with greater transparency as to a model’s origins.

In addition, Naamsa CEO Mikel Mabasa stated that multiple stakeholders need to come to the party to resolve the issue, including the South African Revenue Service (SARS), the Department of Transport, and the South African Police Services (SAPS).

Transnet has already agreed to move the import of foreign-bound imported vehicles from Durban’s port to Maputo, Mozambique, therefore making it harder for these units to “disappear” before reaching their stated destination across South Africa’s land borders.

However, one alternative solution that has been put forward is to entirely scrap the policies preventing the import of used cars.

This was recently suggested by the Democratic Alliance (DA) political party, arguing that the introduction of these cheaper models will stimulate economic activity better than maintaining expensive local production facilities.

The party also suggested that an age cap could be introduced on pre-owned autos and that import duties would be applied at the same rate as new ones.

Theoretically, this would eliminate an illegal market and generate revenue once the incoming models are taxed accordingly, but Naamsa rejected the proposal claiming it would have disastrous consequences for the local industry.

Mabasa argued that it would destroy demand, leading to a loss of investment in the manufacturing sector that will ultimately result in them closing shop, costing thousands of jobs.