Local content the key to automotive growth

EFFORTS to enhance downstream localisation in the automotive manufacturing process are a significant trigger for manufacturing-led growth in South Africa. Not only does this create an environment where we can partner with the government to stimulate shared value in a globally relevant and competitive automotive sector, it forms a sustainable foundation for local and regional supply chain development, job creation and skills promotion in the coming years.

As we see heightened competition between countries to attract new production facilities (including from some markets in Africa), the local automotive sector will need to accelerate its efforts to address competitive levers such as investments in new technology — including electrification of mobility — entrenchment of world-class quality processes in our manufacturing, and investment in skills development and skills transfer.

In South Africa specifically, we need to use this as an opportunity to proactively undertake opportunities to directly empower communities and industry around our operations. It is here where we are able to use our investment in skills to build a supply chain that is helping drive the competitiveness of automotive as a sector, but at the same time is creating economic value which is both complementary and independent of the sector as a whole.

It’s this “tertiary” evolution of our regional supply network that will trigger capital expenditure, grow the government’s tax base and drive manufacturing output and employment — all positive economic contributors.

Indeed, it is in partnering with the government that we are able to create an environment where together we can develop companies that produce local content for the automotive sector, while producing for large industry as a whole. For this to happen we need to reinvent the current structure of “incubation centres” to create one where the automotive sector provides the framework for skills and operations and where the government acts as a shareholder in providing the appropriate development funding.

More important, this should be prioritised and accelerated.

To date, our investments in a new training centre will provide an opportunity to transfer technical skills to other industries. So while the government is “looking for jobs”, we can meaningfully contribute to this goal through amplifying current incubation centres and associated broader supply networks. Both are direct levers of labour (jobs) and sustainable skills.

So while the current employment multiplier of the industry is 1.6 (that is, 1.6 employment opportunities are created for every one prospect realised in the industry), it makes sense that our priority should be capitalising on this. It follows that a partnership between the automotive sector and the government will result in a tremendous advantage for South Africa, as well as direct benefits for those living and working in proximity to the sector.

This ‘tertiary’ evolution of our regional supply network will trigger capital expenditure

Working with the government to build a bigger and better supply network (read more mature and more globally competitive) will allow us to lift local content levels significantly. The direct and indirect benefits of this go without saying.

To some degree, BMW’s announcement that it will invest around R6-billion in producing the BMW X3 is a catalyst for this. We welcome this as an opportunity to stimulate enhanced contribution to the country, as we bring more and more suppliers into the fold.

This is definitely not a quick fix, but it does simultaneously address gaps in empowerment and in how the automotive sector can contribute to manufacturing-led growth. It starts with producing the right car for the right markets, as production follows demand. The BMW X3 itself will become an increasingly relevant product in South Africa but also elsewhere as the automotive sector expands globally and into the rest of the continent.

Localisation of content is key to this expansion. It is something we will play a committed and active part in as an economic and social priority.

Abbott is BMW Group SA’s MD