Ambitious plans to increase black participation in the SA motor industry are bearing fruit. However, slower-than-expected growth across the industry as a whole may cause planners to cut back on their transformation timetable.
CEO of the Automotive Industry Transformation Fund (AITF), Jabulani Selumane, says a planned 2025 review of government automotive policy may lead to a “recalibration” of transformation targets. Since 2020, the AITF has helped establish 67 black-owned companies in activities as diverse as alloy wheels, car-carriers, plastic parts, aluminium sub-assemblies and camshafts.
The short-term aim is to take this to at least 90 by 2029 — a goal that Selumane says is well within reach. So far, he says, more than 2,300 permanent jobs have been created. As the motor industry moves beyond petrol and diesel power and into electric vehicles (EVs), Selumane says future projects are likely to include EV charging infrastructure, electric-battery manufacture and the beneficiation of raw materials such as copper and lithium.
The AITF works alongside the 2021-2035 automotive production and development programme (APDP), which is part of the broader SA Automotive Masterplan. Their goals, based on 2018 estimates, are to double annual SA vehicle production from 600,000 to 1.2-million, double vehicle and components manufacturing employment from 120,000 to 240,000, and increase the average value of local content in SA-made light vehicles (cars, bakkies and minibuses) from 40% to 60%.
Since 2018, however, Covid-19, wars and local and global economic malaise have all intervened. Local vehicle production has barely shifted. Industry association Naamsa, in its latest quarterly review, expects 620,900 vehicles to be built this year. The 2035 target of 1.2-million is increasingly considered unachievable. In that case, so is everything else.
Bigger production volumes create the space for more employment, local content and transformation. Hence the need for a rethink. The government wants black-owned companies to account for at least 25% of value addition in local vehicle manufacture. While some of this will be achieved by selling former white companies to black owners, most growth will come from newcomers to an enlarged industry.
One of the most effective ways is through a partnership between the AITF and SA’s seven major vehicle manufacturers — local subsidiaries of multinationals BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota and Volkswagen. The parent companies refused to cede shares in their SA operations but, to meet black empowerment goals, agreed instead to fund the development of black suppliers of components and services. Between 2020 and 2029, the seven will provide the AITF with R2.28bn to prepare black companies for business — through loans, capital expenditure or funding of capacity and business development.
In some cases, the AITF has taken a shareholding in new enterprises but, as a nonprofit organisation, it does not take anything out. Selumane said the overwhelming majority of companies set up so far (30% were women-owned) had been successful. Inevitably, market circumstances — such as the announcement this year by Mercedes-Benz SA that it would significantly cut C-Class car production at its East London assembly plant — affected the supplier market.
However, the 67 AITF-supported companies currently enjoy long-term contracts worth about R14bn. This is because the seven motor companies, in addition to the R2.28bn committed to the AITF, are spending another R3.72bn to provide black companies with market access and procurement opportunities. This may be to supply the SA subsidiary or, in some cases, overseas vehicle assembly plants.
Add together the R2.28bn in AITF funding and R3.72bn of market access and procurement, and vehicle manufacturers are in for a combined R6bn. Individual contributions depend on production volumes. That R6bn could grow further if, as currently being negotiated, newcomers Stellantis and Beijing Automotive Industrial Co (BAIC) chip in from 2026, when they have said would start local vehicle manufacture.
Selumane says other potential newcomers, like Chinese EV specialist BYD, will also be brought into the fold as and when they invest in local manufacture. In addition, some multinational components companies have negotiated to support AITF initiatives for their sector rather than give up shares, and a number of foreign-owned truck and bus assemblers want to do the same. In the latter case, it’s not clear yet where their contributions will be spent.
Production volumes are so low that it makes little economic sense to engage in wholesale components localisation. Most trucks and buses are assembled from imported kits. Having been set up for an initial 10 years, the AITF’s mandate will come to a close at the end of 2029. Given its importance to the overall success of the APDP and master plan — both of which are due to continue for a further six years, to 2035 — it’s hard to believe the AITF won’t continue.
Selumane is in no doubt about its importance. “We have a fantastic opportunity to contribute to empowerment and transformation,” he says. “The need for both won’t end in 2029. With changes that are happening in the industry, it will actually become greater.”
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