VWSA warns of production crisis if empowerment plan is enforced
VEHICLE manufacturing in South Africa (VWSA) would grind to a halt if the government linked the incentives and benefits of the Automotive Production and Development Programme (APDP) and Automotive Incentive Scheme (AIS) to the envisaged empowerment ratings of global multinational companies that produced vehicles locally.
This was the dire warning by Volkswagen Group South African chairperson and managing director Thomas Schaefer to recent comments by trade and industry minister Rob Davies that the government was considering linking these incentives to broad based black economic empowerment (BBBEE).
“Nobody wants to be non-compliant. We would love to be Level 4 but it is physically impossible with the current rules,” Schaefer said.
All the global vehicle manufacturers with manufacturing facilities in South Africa had a Level 8 BBBEE rating.
He questioned why it was so important for global vehicle manufacturers in South Africa to improve their ratings to Level 4 because someone has indicated the benefits of the APDP and AIS were to be linked to a level rating, particularly with the amount of money that was being spent by these manufacturers on corporate social responsibility, training and other initiatives.
Schaefer stressed that none of the vehicle manufacturers would be able to achieve a Level 4 rating.
“If nobody achieves it, and AIS and APDP is only applicable to those who achieve it, then automotive (manufacturing) will stop tomorrow in South Africa, because without the AIS and APDP there is no business
rationale to be here (in South Africa) anymore,” he said.
Schaefer said this issue had been discussed with the government and “the good thing is the government listens”.
“We have had good discussions about that and we know our responsibilities and are pushing with all we have,” he said.
Schaefer’s comments follow senior office bearers of the National Association of Automobile Manufacturers of South Africa, the representative body of new vehicle manufacturers, which had been announcing in June that the industry planned to establish a R3.5 billion transformation fund that would allocate funds to develop black ownership in the car industry supply chain and vehicle dealership network.
Industry sources subsequently informed Business Report that the industry was lobbying the government to accept its planned transforma-
tion fund as an equity equivalent initiative for the ownership pillar of the new BBBEE codes.
The lobbying had resulted from the fact that the locally-based vehicle manufacturers had a major challenge in regard to the ownership requirements of the new BBBEE codes, because they did not have any equity for sale as they were wholly-owned subsidiaries of global multinational companies.
Volkswagen South Africa in June officially launched the Volkswagen BBBEE Initiatives Trust, which was established last year and is an initiative to implement its strategy of deepening localisation, increasing its competitiveness and business sustainability.
The major aim of the trust was to increase the number of quality black-owned suppliers in the automotive sector value chain, primarily by providing financial and non financial assistance to qualifying blackowned suppliers.