Firms to get act together
Davis says future policy will demand motor sector supports upskilling black suppliers
MOTOR industry companies that don’t help develop blackowned newcomers are risking not only industry incentives but also their own future.
A new drive to increase black participation could lead, in extreme cases, to the industry-supported creation of direct competitors to existing players.
Significant black involvement in the industry is among the goals of the 20132020 automotive production and development programme (APDP), but it has been happening painfully slowly.
Trade and Industry Minister Rob Davies, whose department manages the programme, has repeatedly expressed frustration at the pace of change.
Dave Coffey, president of the National Association of Automotive Component and Allied Manufacturers (Naacam), says that out of hundreds of suppliers dealing directly with vehicle manufacturers, only 15 are black-owned.
Of those, he says, most supply services – for example, the manufacturing of product handbooks – rather than vehicle parts.
Now Davies has lost patience. At an automotive conference in Durban last week, he said future policy would demand measurable commitments by vehicle and components manufacturers to black supplier development.
Companies failing to act could lose access to incentives offered through the APDP and its successor. These incentives include import duty rebates and partial investment recovery.
The same threat applies to companies failing to achieve level four in future broad-based black economic empowerment codes. The shape of those codes is the subject of intense debate.
The challenge for Davies is that the country’s seven major vehicle manufacturers, namely BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen, are all wholly owned by multinationals. So are nearly all the local components companies supplying parts directly to vehicle production lines.
However, Chinese manufacturer BAIC, in the early stages of an R11billion project to build a vehicle assembly plant near Port Elizabeth, has taken a different approach. Government’s Industrial Development Corp is a 35% equity partner.
Local industry executives say government has suggested foreign parents of 100% subsidiaries cede 10% to local ownership. The idea has not been well received.
Volkswagen SA managing director Thomas Schaefer says: “Companies have spent billions of rand here. They’re not just going to give it away.”
Another suggestion, says Coffey, is a profit-share scheme in terms of which companies would pay into a fund that could be used for black industrialisation.
Some supplier-development initiatives are already under way. Many companies have their own programmes.
The non-profit Automotive Supply Chain Competitiveness Initiative, supported by government, industry and labour, has played a pivotal role in broadening the industry’s supply chain base.
The Automotive Industry Development Centre trains and mentors potential black players.
Chief executive David Masondo says some recently “graduated” after an incubation process lasting between five and seven years.
But Coffey says: “We don’t have five years. Government deadlines mean we have to find candidates now.”
Davies wants the current 38% average local content in South African-made vehicles to rise to 60% in the next few years. Much of that, he hopes, will be provided by black suppliers.
“We have to make it happen,” says Coffey. “There is no choice.” — BDLive