Small duck in a big pond
Industry waits anxiously for details of future policy after the current one expires in 2020
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
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