Carmakers commit R6bn to improving empowerment scorecard
South Africa’s seven vehicle original equipment manufacturers (OEMs) have officially launched a R6 billion Automotive Industry Transformation Fund, which is R2 billion more than previously mooted by industry executives.
The fund is designed to support black participation in the automotive industry supply chain.
It means the participating OEMs – BMW, Ford, Isuzu, Nissan, Toyota, Mercedes-Benz and Volkswagen – will, for the first time, be able to meaningfully participate and comply with all five elements of the broad-based black economic empowerment (B-BBEE) generic scorecard, specifically the ownership element.
National Association of Automobile Manufacturers of South Africa (Naamsa) chief executive Michael Mabasa said the launch of the fund marks the beginning of a major sector-wide initiative to meaningfully transform the automotive industry by broadening and deepening the participation of black and historically disadvantaged entrepreneurs to participate in the sustainable growth and development of the industry.
In support of the objectives of the Automotive Masterplan, the fund’s mission will be to accelerate the empowerment of black South Africans within the auto sector; upskilling of black employees and prospective auto entrepreneurs; expansion of black-owned dealerships and authorised repair facilities and workshops; substantially increase the contribution of blackowned automotive component manufacturers within the automotive supply chain; and create meaningful and sustainable employment opportunities for young and female black South Africans.
The unique feature of the fund is that it is powered, supported and funded by the seven OEMs that will directly use the services of black-owned businesses to grow and deepen transformation across the entire auto value chain.
The launch of the fund follows SA’s automotive industry appearing in recent years to be on a collision course with the government over compliance with new B-BBEE codes.
The pressure over empowerment intensified in 2017 when former trade and industry minister Rob Davies confirmed these global multinationals were required to achieve a Level 4 B-BBEE grading if they wanted to draw on the benefits of the Automotive Production and Development Programme.
This led to some industry executives warning that SA’s automotive industry would come under pressure.
SA’s vehicle manufacturers first indicated that they would create a transformation fund at a media briefing in June, 2017, following engagements between industry executives and the ANC.
Extensive consultations and discussions with the department of trade and industry followed, resulting in an agreement on provision for the recognition of contributions in lieu of a direct sale of equity through equity equivalent contributions.
Naamsa president Andrew Kirby announced in August that an automotive industry transformation fund in excess of R4 billion would be established before the end of this year.
Mabasa said the fund is a business imperative: “We need to systematically and unashamedly address barriers to entry which remain very high for many new and aspiring entrants,” he said.
BMW Group SA and sub-Saharan Africa chief executive and Naamsa vice-president Tim Abbott said he is delighted the fund has been launched.
“The Automotive Transformation Fund is pioneering, and I think a perfect blueprint for other industries to consider.”
A need to address barriers to entry