Caterpillar in biggest-ever equity equivalent deal
US-BASED Caterpillar, the earthmoving equipment and power systems multinational company, has agreed to an equity equivalent investment programme with the Trade and Industry Department that will result in the cumulative localisation of components worth R1.3 billion over the next 10 years.
Trade and Industry Minister Rob Davies said yesterday that this value addition was expected to lead to the creation of about 3 900 direct and indirect jobs and create opportunities for black-owned supplier companies.
Zakieya Parker, managing director of Caterpillar Industries, said this was the biggest-ever equity equivalent investment programme in South Africa and one of Caterpillar’s biggest in Africa to date.
“This 10-year investment clearly demonstrates our company’s long-term commitment to South Africa,” she said.
Parker said Caterpillar believed its investment into South Africa would have a positive effect on many industries that were key to the economy’s industrialisation and transformation drive, including mining, construction, paving, forestry, rail and power generation, which included industrial, gas and solar energy applications.
She said the programme comprised five integrated and interdependent components: local and supplier development, enterprise development, localisation of component content, skills transfer and development, and job creation.
Parker said localisation opportunities Caterpillar was looking at included sourcing component locally to support the mining, construction, energy and transportation industries.
She added that Caterpillar’s comment was not only about investing in physical and hard assets, but was firstly about investing in people.
Investment in SA likely to have a positive effect on many of the key industries.
To that end, Caterpillar would provide free, best-inclass local supplier development training that is Sector Education and Training Authority aligned for both new and existing suppliers.
“The multi-year investment will allow local, empowered South African suppliers to develop world-class capabilities and the capacity to plug into Caterpillar’s global supply chain. This opens up export opportunities to regional and global markets,” she said.
Davies said the Caterpillar equity equivalent investment “ticked a few boxes” for government.
“Caterpillar equipment that used to come in fully manufactured off the boat and ready to rock and roll will now be also partially manufactured in South Africa, so we will have a high level of value addition.
“Second, we will have participation by black-owned companies in adding value to the Caterpillar equipment,” he said.
Davies said the government recognised that it was not feasible for some multinational companies, whose ownership was somewhere else, to conclude an ownership deal in South Africa.
He said in those instances these companies should apply to participate in the equity equivalent investment programme.
Emmy Leeka, chief executive of Barloworld Equipment Southern Africa, the distributor of Caterpillar products in the region, said they believed the equity equivalent investment programme would assist Barloworld with its BBBEE grading.
Leeka said Barloworld had started engaging with Caterpillar about four years ago on this project and to invest in the country to enable them to source locally.
He said Barloworld’s BBBEE rating had dropped one notch to Level 3 in terms of the new revised codes but it was their ambition to become a Level 1 supplier.
“Compared to other equipment suppliers, Barloworld is leading the pack,” he said.