Small duck in a big pond

In­dus­try waits anx­iously for de­tails of fu­ture pol­icy af­ter the cur­rent one ex­pires in 2020

Financial Mail - - SPECIAL REPORT -

Like a duck cruis­ing serenely above the wa­ter but with its feet pad­dling fu­ri­ously be­neath the sur­face, the SA mo­tor in­dus­try is rarely as calm as it looks.

Fol­low­ing record cap­i­tal in­vest­ments of more than R10bn by ve­hi­cle and com­po­nents man­u­fac­tur­ers in 2017, and the an­nounce­ment this year of a record R10bn spend by Mercedes-benz, there’s lit­tle doubt that multi­na­tional mo­tor com­pa­nies find it worth­while to stay in SA.

Equally, it’s worth re­mem­ber­ing that their SA spend­ing is tiny com­pared to their spend­ing else­where.

Fel­low Ger­man com­pa­nies BMW and Volk­swa­gen both com­pleted R6bn spend­ing pro­grammes this year, Ja­panese truck­maker Isuzu be­gan lo­cal op­er­a­tions af­ter buy­ing out the dis­in­vest­ing Gen­eral Mo­tors (GM), and Chi­nese com­pany BAIC fi­nally started to do some­thing with the huge plot of East­ern Cape land that’s sup­posed to house SA’S first new, full-scale ve­hi­cle as­sem­bly plant for over 40 years.

The mo­tor in­dus­try re­mains the jewel in the crown of SA in­dus­trial pol­icy. As a re­port by the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of SA (Naamsa) points out, the in­dus­try con­trib­uted 7.7% of SA GDP in 2017, 30.1% of man­u­fac­tur­ing out­put and 13.9% of ex­ports.

It was also re­spon­si­ble for

56.4% of African ve­hi­cle man­u­fac­tur­ing out­put.

Ve­hi­cle and com­po­nents man­u­fac­tur­ers em­ploy more than 110,000 peo­ple di­rectly. Throw in au­to­mo­tive-de­pen­dent jobs in other in­dus­tries sup­ply­ing goods and ser­vices, and the num­ber rises to more than 900,000.

What, in the words of a pop­u­lar TV ad, could pos­si­bly go wrong?

When the depart­ment of trade & in­dus­try (DTI) direc­tor-gen­eral Lionel Oc­to­ber told a re­cent mo­tor in­dus­try con­fer­ence that there was “99% agree­ment” between gov­ern­ment and in­dus­try over the terms of the next stage of au­to­mo­tive pol­icy, he was a lit­tle op­ti­mistic.

In fact, there are con­sid­er­able dif­fer­ences of opin­ion over what should hap­pen af­ter the cur­rent au­to­mo­tive pro­duc­tion & de­vel­op­ment pro­gramme (APDP) ex­pires at the end of 2020. Its suc­ces­sor, usu­ally re­ferred to as the au­to­mo­tive mas­ter­plan, will run from 2021 to 2035.

The APDP has been a con­sid­er­able suc­cess since 2013, at­tract­ing more than R50bn in for­eign in­vest­ment, in­creas­ing qual­ity and ef­fi­ciency, and help­ing to boost ex­ports, par­tic­u­larly of built-up ve­hi­cles.

What it hasn’t done to the sat­is­fac­tion of gov­ern­ment is in­crease lo­cal con­tent and en­cour­age par­tic­i­pa­tion by black-owned com­pa­nies. Oc­to­ber says the in­dus­try has fallen be­hind other sec­tors of the econ­omy not only in black in­dus­tri­al­i­sa­tion but also in the gen­eral black em­pow­er­ment field. As things stand, ve­hi­cle man­u­fac­tur­ers oc­cupy level eight on the em­pow­er­ment scale. That’s about as bad as it gets.

Gov­ern­ment has set a tar­get of at least level four so it has sug­gested for­eign mo­tor com­pa­nies sur­ren­der up to 25% of their SA sub­sidiaries to black part­ners. That idea was re­jected out­right and, in­stead, com­pa­nies of­fered to cre­ate a R3.5bn ven­ture cap­i­tal fund to sup­port the de­vel­op­ment of black sup­pli­ers.

Oc­to­ber says gov­ern­ment has ac­cepted the idea. What is not clear is whether the fund will en­ti­tle com­pa­nies to all the em­pow­er­ment points they would have

Re­nai Moothilal: In­cen­tive to in­vest in value-added tech­nolo­gies could in­crease pro­duc­tion

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.