Government reformulates its motor industry strategy

The Department of Trade, Industry and Competition, headed by Ebrahim Patel, has identified six focus areas to drive the South African automotive industry forward

Speaking at the recent National Association of Automobile Manufacturers of South Africa (Naamsa) Automotive Conference at Kyalami, Patel said government was re-imagining its industrialisation strategy, seeking ways to unleash private investment with re-energised strategies to ensure policy predictability and the efficient use of resources.

“We have already had many meetings with companies and organisations – planning is going well,” he said.

Patel added that South Africa’s new Motor Industry Masterplan – announced last November – was intergral to the re-imagined strategy and included growing vehicle production to one percent of global output, doubling employment, increasing local content to 60 percent, improving global competitiveness and achieving transformation across the value chain.

Patel said the first area of government’s focus aimed at expanding existing markets. He pointed out that last year the motor industry exported products valued at R180 billion – representing 14 percent of the country’s export basket – with items worth R32 billion going into Africa. He said he believed that number would grow significantly when the African Continental Free Trade Agreement came into effect next year.

A second area of focus was to support improved industry performance by adapting new technologies, including those emanating from global trends towards electric vehicles and autonomous driving. Patel said he believed South Africa could become a supply base for an international manufacturing industry that specialised in these types of vehicles.

A third area of focus was to attract investment into the motor industry, with the aim of increasing localisation substantially. Seven original equipment manufacturers (OEMs) that built vehicles in South Africa had invested significantly over the past five years and now the objective was to attract even more investment, particularly in the component manufacturing segment. “Government is fully supportive of this drive, and to this end an official investment conference will be held from November 5 to 7,” he announced.

Transformation was also an important focus with the priority being the building of an inclusive economy within a non-racial society. Patel warned that the current pace of transformation was far too slow, and that the national Automotive Transformation Fund – funded to the tune of more than R4 billion by OEMs – would be activated to lend impetus to the establishment of black-owned companies and the training of staff.

The fifth focus area concerned the availability of equitable spatial zones, which can be developed into motor industry supplier parks and the like. “Already, a special economic zone (SEZ) is being planned for Tshwane, which will have an area similar to 200 football fields. This aspect of support is to help to improve the competitiveness in terms of cost and quality for locally made vehicles,” he said.

The sixth focus area was to improve the capability of state owned onterprises (SOEs), such as Eskom, through better cooperation between role players with a view to enhancing performance through partnerships formed with private enterprises.

“In fact, throughout the entire value chain we need to develop partnerships and technology enhancements between government and private enterprise, industry and suppliers and industry and labour. We want a large and successful automotive industry infrastructure with the state providing an enabling environment,” he said.

In his address, Andrew Kirby, president of Naamsa, said as much as R60 billion could be invested in the South African vehicle and component manufacturing industries in the next five years. Reacting to Patel’s remarks, Kirby said the local motor industry was not only leading the drive to increase industrialisation in the country, but was also a major employer, with up to 1,4-million people involved directly or indirectly in automotive related jobs.

He added that the industry was in a healthy position in terms of having a positive balance of trade account with the number of exported built-up vehicles and components growing steadily. However, he stressed the importance of being globally competitive in terms of cost, quality, and reliability of supply, since several other countries were eyeing South Africa’s automotive export markets.

Kirby said growth in production volumes, increased localisation of components and use of latest technologies in all aspects of the motor business were vital components in achieving transformation goals.

Referring to the Automotive Transformation Fund, Kirby said it would be a key enabler in the motor industry’s commitment to establish 500 Tier 2 and 3 suppliers  − 130 of them black owned.  He stressed the importance of collaboration between various vehicle and component manufacturers to enable cost-effective localisation. He said that already, 10 joint projects had been identified for the process.

“We expect local procurement to grow by R12,6 billion in the next five years, together with a 14-percent increase in direct employment, which equates to creating another 16 000 jobs, mainly in the component manufacturing sector as local content grows from 39 percent to at least 42 percent,” he said.

He added that raw material beneficiation – such as making automotive-grade steel in South Africa – was another priority. In this respect he had been informed that the local steel industry was currently investigating this potentially valuable development.