State should do more to help motor industry, says Ebrahim Patel

Racial transformation in the SA motor industry is “unbearably slow” but the process will not accelerate if the government does not provide the right policy environment, trade and industry minister Ebrahim Patel said on Thursday.

Under the updated Automotive Production and Development Programme (APDP), starting in January 2021, the industry plans to double vehicle production and jobs by 2035, increase the value of local content by 50% and fast-track the development of black-owned companies in the components supply sector.

However, Patel said this depended on the government providing an “enabling” environment. Motor companies and their suppliers have invested many billions of rand in recent years but much of the national transport infrastructure on which they depend is under-resourced. Major ports, which handle the industry’s rapidly growing exports, are inefficient and overpriced.

“We need to improve the performance of the state. We have to be more efficient, offer faster decision-making and provide better co-ordination between departments. We need to be a smart state,” Patel said.

“We want the industry to be globally competitive, but competitiveness is not just a function of what happens on the factory floor.”

Patel was speaking in Kyalami, Midrand, at the annual conference of the National Association of Automobile Manufacturers of SA (Naamsa). It was his first major automotive speech since replacing former minister Rob Davies, who has shaped successive automotive policies since 2009.

Naamsa president and Toyota SA CEO Andrew Kirby said that while the industry was committed to transformation, access to government funding for black business start-ups was “slow and cumbersome”. He hoped the creation of a R4bn automotive transformation fund, capitalised and co-managed by motor companies, would fast-track black participation.

He said localisation could also accelerate with the right support. Many of the raw materials used in vehicle manufacture, like vanadium and platinum, were found in SA but were sent overseas for processing before being imported as finished products. Automotive steel, aluminium and resins were also imported, despite the presence of SA suppliers.

Patel said the motor industry was the success story of SA’s industrialisation policy. It contributed nearly 7% to GDP and 14.5% of SA’s total export value. However, the shift to new technologies and materials meant it had to continually reinvent itself.

Patel said SA could not afford to ignore the rise of electronics which, as Kirby pointed out, would soon account for nearly 50% of a typical car’s value. At the moment it is 15%.

The global shift from internal combustion engines to electric vehicles (EVs) required the SA industry to be ready to build not just new generations of components but also vehicles.

Some years ago, Davies suggested SA could become a global manufacturing base for EVs. That idea seemed to have gone cold but, pointing out that SA already exports 60% of its vehicle production, Patel said: “[Local EV manufacture] doesn’t have to be based on consumption and infrastructure here but on seeing the opportunities in developed markets.”