Johannesburg - South Africa could say goodbye to its automotive industry if the government insisted on enforcing the revised broad-based black economic empowerment (BBBEE) codes on locally based multinational vehicle manufacturers, Volkswagen South Africa (VWSA) chairman and managing director Thomas Schaefer said.
It was impossible for multinational vehicle manufacturers in the country to comply with the revised codes and rules and achieve a level 4 rating, because, with the ownership element, they lost so many points, Schaefer said.
The updated codes that came into effect from May 1 last year meant companies would be unable to achieve a BBBEE compliance rating of level 4 or above without doing some sort of ownership transaction, although the ownership target remained unchanged at 25 percent plus 1 share.
Jeff Nemeth, the chief executive of the Ford Motor Company of South Africa and president of Ford sub-Saharan Africa, told Business Report last year that multinationals did not like to dilute their brands and found the ownership pillar in the new codes “very onerous”.
The National Association of Automobile Manufacturers of SA confirmed last year that the motor industry was considering establishing an automotive industry sector charter because of the difficulty multinational original equipment manufacturers had in complying with the ownership pillar of the new codes.
Schaefer said that all the multinational vehicle manufacturers in South Africa, with the exception of General Motors (GM), barely make it to level 8 and GM was a level 7.
The BBBEE programme was “great”, but the thresholds and targets for the automotive industry were undoable.
Schaefer said the Trade and Industry Department had accused manufacturers of dragging their feet and not doing enough to trade with black-owned businesses.
This resulted in VWSA requesting a list or the database of all black-owned businesses in the country from the department, but no such database existed.
Schaefer said VWSA decided to create the database itself and approached every single BEE verification agency and the chambers of business to try and track down any black-owned business that could do anything related to automotive. They came up with a total of 41 companies, but according to the BBBEE rules VW alone needed a total of 500 black-owned companies with which to trade.
Schaefer said VWSA had now invested in a trust with an incubator and were “pushing this on all fronts”. “But will it bring you to level 4? Absolutely not. This is going to be quite a road in front of us and if the government wants to enforce level 4, good luck,” he said.
Schaefer did not believe there was an imminent threat that the government would try to enforce the new BBBEE codes on automotive companies and there was not a deadline by which the industry had to comply. “We are too highly invested in this country to ignore it,” he said.
VWSA announced last year that it would be investing more than R4.5 billion in South Africa by 2017 to increase the production capacity of its Uitenhage plant by 50 percent to 150 000 units a year and for the production of at least two new vehicle models. This was followed by its first black-owned supplier day in Uitenhage in May this year as part of an initiative to expand its black-owned supplier base.