Peugeot sues govt for N$80m

French automaker PSA Automobiles SA is suing the Namibian government for its inability to allow it to compete competitively in the southern African market, effectively leading to its failure.

The automaker is a joint-venture partner in an assembly plant situated in Walvis Bay and owns a 51% stake, while government owns the remaining 49% in Peugeot Opel Assembly Namibia (POAN).

PSA’s initial contribution to the share capital of POAN was about N$17.5 million, and the Namibia Development Corporation’s (now Namibia Industrialisation and Development Agency) contribution was about N$12.7 million, each amount in proportion to their respective shareholding.

The automaker said it had complied with all its obligations under an investment agreement to assemble more than 150 vehicles.

The assembly plant was anticipated to achieve a target volume of 5 000 units by 2020 to meet the Southern African Customs Union (SACU) demand.

The plant has been plagued by its inability to export assembled vehicles to South Africa, the region’s biggest market.

Last year, the deputy executive director in the ministry of industrialisation Michael Humavindu told Namibian Sun that government was working tirelessly to resolve these export issues.

As of June last year, only 30 of 150 vehicles had been bought by government, as per a 2019 Cabinet directive that all government entities must reserve their vehicle purchases for Peugeot and Opel cars assembled at Walvis Bay.

The 150 vehicles assembled in nearly five years are a drop in the ocean compared to the annual targeted volume of 5 000 units by 2020, as promised by shareholders at the time.

The Opel Grandland X and Peugeot 3008 were the first outputs from this factory, while other products were meant to follow.

PSA honoured arrangement

“In particular, [PSA] has - to date - used all reasonable endeavours to implement the assembly processes of POAN in accordance with that business plan, in that [PSA] assisted in the designing, constructing, testing and installation of the tooling for the assembly of vehicles at the plant,” the French automaker’s particulars of claim read.

“[PSA] pleads that Namibia is a signatory to and has ratified the Southern African Development Community (SADC) treaty, including the SADC trade protocols. The [government] could also have utilised the provisions of the protocol on trade in the SADC region to further comply with their obligations under the investment agreement.”

Government had - as a SACU member - not facilitated the cross-border movement of goods from POAN within the union and failed to promote conditions of fair competition in the common customs area and substantially increase investment opportunities for the plant, it said.

The Namibian government also did not seek out infant industry protection for POAN as a SACU member state, PSA claimed.

“[The Namibian government has] not implemented and/or taken the required steps which would afford POAN and/or its products any protection contemplated in Article 26 of the SACU agreement,” PSA said.

Unable to compete

PSA said it informed government that it could not compete on equal footing with other vehicle assembly plants in SACU because it did not seek exemption from normal duties and taxes levied upon the export of vehicles from Namibia and SADC member states, including Namibia.

Without the implementation of the duty remission incentive scheme, POAN was unable to compete against vehicles supplied by other vehicle manufacturers, it said.

The company further claimed that without such sales, the plant would be unable to pay [PSA] for the semi-knocked down vehicle components supplied to POAN, while it is also unable to continue its normal operating expenses in the ordinary course of POAN’s business.

“In addition, POAN is still unable to export such vehicles to South Africa on a free trade basis as the [Namibian government] failed to ensure the required exemption of all excises and custom duties, taxes or levies in relation to the export of vehicles to South Africa and other country members of the SACU and SADC areas,” PSA said.

According to the French automaker, it is owed N$79.9 million as a consequence of its unrecovered investment in Namibia, made up as initial share capital injected to the value of N$17 million, research and development costs to the value of N$14 million and unpaid invoices totalling N$48.9 million.