Billions for EC auto sector

25 November 2019 | Web Article Number: ME201917189

SMME Development & Support
Billions for EC auto sector

THE National Association of Automobile Manufacturers (NAAMSA) of South Africa has confirmed the launch of a R6-billion Automotive Industry Transformation Fund designed to support black participation in the automotive industry supply chain.

This, combined with a slew of other investments from original equipment manufacturers (OEMs), will see billions flowing into the Eastern Cape’s automotive sector over the next few years.

Officially announced by President Cyril Ramaphosa at the recent South African Investment Conference, the fund is being touted as a transformative tool that will contribute directly to the sustainable development of the country’s productive economy.

NAAMSA hailed the fund’s launch as the beginning of a major sector-wide initiative to meaningfully transform the automotive industry by broadening and deepening the participation of black and historically disadvantaged entrepreneurs to participate in the sustainable growth and development of the industry.

In support of the SA Automotive Masterplan objectives, the fund’s mission will be to accelerate the empowerment of black South Africans within the auto sector; upskilling of black employees and budding auto entrepreneurs; expansion of black-owned dealerships and authorised repair facilities and workshops; substantially increase the contribution of black-owned automotive component manufacturers within the automotive supply chain; and create meaningful and sustainable employment opportunities for young and female black South Africans.

Participating OEMs - BMW, Ford, Isuzu, Nissan, Toyota, Mercedes-Benz and Volkswagen - will for the first time, be able to meaningfully participate and comply with all five elements of the Broad-Based Black Economic Empowerment (BBBEE) generic scorecard, including the ownership element.

Designed to seed, develop and grow black-owned companies within the automotive supply chains, the unique feature of the auto transformation fund is that it is powered, supported and funded by the seven OEMs that will directly use the services of black-owned businesses to grow and deepen transformation across the entire auto value chain.

NAAMSA CEO, Michael Mabasa said, “This auto fund is not a nice to have, but a business imperative that makes business sense to the success and sustainability of the industry. We need to systemically and unashamedly address barriers to entry which remains very high in the motor industry for many new and aspiring entrants”.

Speaking on behalf of the seven South African based OEM Chief Executive Officers, BMW Group South Africa and Sub-Saharan Africa CEO and Vice President of NAAMSA, Tim Abbott, said, “The Automotive Transformation Fund is pioneering, and I think is a perfect blueprint for other industries to consider.

“This is an industry-wide initiative, bringing together suppliers and OEMs to collaborate for common good. It’s my belief that real meaningful growth in our industry must by its nature be transformative. Opportunities exist for new entrants, for private capital, and for other government initiatives to tie in with the fund.”

The fund will be independently incorporated and registered as a non-profit company and will have its own board of directors and executive management team in line with the Companies Act in order to enhance transparency and good corporate citizenry.

Multi-billion bakkie boost

The launch of the fund was followed closely by confirmation from Isuzu Motors of Japan that it will be investing R1.2 billion into the next generation bakkie programme in South Africa, while an additional total local content value of R2.8 billion will be generated through the lifecycle of the programme.

This development follows Isuzu’s take over last year of the company's light commercial vehicle operations as well as the balance of shareholding in the trucks business. This decision saved 1000 direct jobs most of them at the Port Elizabeth manufacturing plant, as well as 4000 jobs through its dealer network and many more through its base of 430 suppliers in South Africa.

Current plans are to grow the company’s annual bakkie production to 29 000 units per annum, said Yoichi Masuda, Senior Executive Officer for Isuzu Motors Limited and Chairman of the Isuzu Motors South Africa Board.

“Our decision to invest in the production of the next generation bakkie in South Africa demonstrates our commitment to this market. This is further reinforced by the fact that this operation is the bakkie and truck manufacturing and distribution operation which is 100% owned Isuzu operation outside of Japan.”

Minister of Trade and Industry Ebrahim Patel welcomed the announcement saying it would contribute immensely towards President Cyril Ramaphosa’s investment drive.

“This investment shows confidence in the South African economy’s growth potential and will help to secure more than 1000 direct jobs at the plant. The South African Automotive Master Plan, developed in partnership between government and industry, provides a good basis for companies to plan and gives policy certainty on which investment decisions can be made,” Patel said.

South Africa will initially serve as the main market for the next generation bakkies but with growing volumes expected to be generated from the roll-out of its Sub-Saharan Africa growth strategy, which will be geared at further strengthening its position in key markets as well as its overall distribution footprint.

“The next generation bakkie will be locally engineered to meet the requirements of the South African and key Sub-Saharan Africa markets.” said Michael Sacke, CEO and Managing Director of Isuzu Motors South Africa. “Our customers have come to know our vehicles for their reliability, durability and flexibility and it is important that we continue to build on these strengths.”

Isuzu’s biggest markets in Sub-Saharan Africa currently include Kenya, Zimbabwe, Zambia, Mozambique, Mauritius, Senegal, Ghana and Ivory Coast. Last year the company’s sales in these markets increased by 17% versus the prior year.

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