SA car in­dus­try in R3.5bn BEE plan

Ready to lobby govern­ment

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

SOUTH Africa’s au­to­mo­tive in­dus­try is to lobby the govern­ment to ac­cept its planned R3.5 bil­lion trans­for­ma­tion fund as an eq­uity equiv­a­lent ini­tia­tive for the own­er­ship pil­lar of the new broad-based black eco­nomic em­pow­er­ment (BBBEE) codes.

Nico Ver­meulen, the di­rec­tor of the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of South Africa (Naamsa), the rep­re­sen­ta­tive body of new ve­hi­cle man­u­fac­tur­ers, said on Fri­day that the idea of es­tab­lish­ing a sec­tor code had been aban­doned and the seven lo­cally based orig­i­nal equip­ment man­u­fac­tur­ers (OEMs) would op­er­ate in­de­pen­dently in terms of the generic BBBEE score­card.

How­ever, Ver­meulen said these OEMs had a ma­jor chal­lenge in re­gard to own­er­ship, be­cause they did not have any eq­uity for sale as they were wholly-owned sub­sidiaries of global multi­na­tional com­pa­nies.

“In that re­gard, the OEM ven­ture cap­i­tal (trans­for­ma­tion) fund was for­mu­lated and is now the sub­ject of dis­cus­sion and ne­go­ti­a­tion with the Depart­ment of Trade and In­dus­try (dti),” he said.

Jeff Nemeth, the for­mer chief ex­ec­u­tive of the Ford Mo­tor Com­pany of South Africa and pres­i­dent of Ford sub-Sa­ha­ran Africa, told Busi­ness Re­port in 2015 that multi­na­tion­als did not like to di­lute their brands and found the own­er­ship pil­lar in the new codes “very oner­ous”.

Nemeth said most sec­tor spe­cific codes had been more oner­ous than the gen­eral codes and this was one of the is­sues the in­dus­try would have to work its way through.

The au­to­mo­tive in­dus­try ex­ec­u­tives an­nounced last week that the seven OEMs in the coun­try planned to cre­ate a trans­for­ma­tion fund that would al­lo­cate funds to de­velop black own­er­ship in the car in­dus­try sup­ply chain and ve­hi­cle deal­er­ship net­work.

They also pro­vided de­tails of the in­dus­try-de­vel­oped vi­sion and mas­ter plan to 2035.

De­tails about the fund and mas­ter plan were re­vealed at a me­dia brief­ing last week ad­dressed by ANC trea­surer-gen­eral Zweli Mkhize, ANC eco­nomic trans­for­ma­tion sub-com­mit­tee chair­per­son Enoch Godong­wana and the three au­to­mo­tive com­pany ex­ec­u­tives.

It fol­lowed dis­cus­sions be­tween the par­ties ahead of this past week­end’s ANC’s pol­icy con­fer­ence.

Mkhize de­clined to re­spond to spe­cific ques­tions from Busi­ness Re­port about whether the own­er­ship pil­lar in the BBBEE codes had been dis­cussed dur­ing the meet­ings last week with au­to­mo­tive in­dus­try ex­ec­u­tives.

“We won’t go very far into that ex­cept to say we dealt with the broad prin­ci­ple of what trans­for­ma­tion is about. We are not go­ing to go into a lot of other sticky is­sues be­cause that is be­tween the govern­ment and OEMs. Our point has been that the gen­eral at­ti­tude towards trans­for­ma­tion (by the au­to­mo­tive in­dus­try) is a lot more pos­i­tive than what we would have ex­pected,” he said.

Naamsa pres­i­dent Mike Whit­field said they would be hav­ing a lot of work groups with all the stake­hold­ers.

Car in­dus­try sources ap­proached by Busi­ness Re­port, who did not want to be iden­ti­fied, cast doubt on the in­dus­try be­ing ready to host the planned sum­mit about the fund in July, which was an­nounced at the brief­ing.

The sources said the es­tab­lish­ment of the fund was still in the con­cep­tual phase, ne­go­ti­a­tions with the dti about the fund were at an early stage, the key per­for­mance in­di­ca­tors had not been agreed or fi­nalised and the dti had not signed off on the process.

“The in­dus­try is look­ing for 25 own­er­ship points from es­tab­lish­ing the fund. It’s un­cer­tain whether the dti will ac­cept that R3.5bn, split equally be­tween the com­pa­nies over a 10-year pe­riod, qual­i­fies for 25 points in terms of own­er­ship.

“The com­pa­nies are not go­ing to put hun­dreds of mil­lions on the ta­ble if they do not get the (own­er­ship) points ben­e­fit they are look­ing for,” one source said.

The sources said that the es­tab­lish­ment of the fund was still in the con­cep­tual phase.


A Toy­ota pro­duc­tion line in Dur­ban. Au­to­mo­tive in­dus­try ex­ec­u­tives an­nounced last week that the seven orig­i­nal equip­ment man­u­fac­tur­ers in the coun­try had plans for the cre­ation of a trans­for­ma­tion fund.

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