Equity equivalent investments an option for multinationals
Trade and Industry Minister Rob Davies said equity equivalents was a facility available under the Broad-based Black Economic Empowerment (B-BBEE) Act, and they could apply.
“We are not unrealistic about what we expect in terms of the B-BBEE scorecards. We want to see a progression and incremental progress.
“We are not going to be asking for something ridiculous and the moon,” he said on the sidelines of the official launch of Isuzu Motors South Africa in Port Elizabeth last week.
Davies was responding to reports that South Africa’s major automotive original equipment manufacturers (OEMs) aimed to launch a venture capital fund this year and his previous comments that the vehicle sector was required to achieve a Level 4 B-BBEE grading if it wanted to benefit from the Automotive Production and Development Programme (APDP).
Tim Abbott, the chief executive of BMW South Africa, confirmed earlier this month that the fund would receive R1.75billion a year from OEMs to support black-owned start-up businesses.
Abbott added that OEMs would love their investment to be “match-funded by government” to increase the amount available to support black-owned start-up business to R3.5bn a year.
“We (the OEMs) will never give up ownership. This (equity equivalent investment programme) is a clever way of doing it. The dti (Department of Trade and Industry) are very receptive to the idea, and that’s part of the negotiation,” Abbott said.
Davies said the supplier network was one of the most important entries for industrialists.
He said some automotive companies had already been doing work on their own to try to identify potential black-owned companies that could be in their supply network.
Davies said his department would soon be taking to cabinet the new automotive development programme that would replace the APDP, which expires in 2020.
He said the process to develop the new programme had been “very inclusive and nobody is going to be absolutely surprised by what they see”, although it would “have a few surprises”.
“It’s not that everyone is in 100percent agreement with absolutely everything, so, at the end of the day, we will have to make a call as government.”
But Davies said there would be a large measure of continuity between the new programme and the existing APDP, with a large measure of support for the automotive sector in South Africa, while also seeking to ensure the quid pro quo government needed in terms of job creation, industrial development and supplier development, including black-owned suppliers.
Davies confirmed that there would be an emphasis on the supplier network, because about a quarter of the investment in component manufacturing was required to create the same number of jobs in the automotive manufacturing sector.
“The way we grow jobs and create space for new entrants, particularly black-owned companies, is through the supplier network, and so there will be an emphasis to try to strengthen the auto sector by deepening the supplier presence in South Africa.
“But the details of that still have to go through the cabinet and our own decision-making process,” he said.
Davies previously indicated that he would like a 60percent local content in the vehicle manufacturing sector, but he emphasised this was an “aspirational target over time”.
He said they would certainly seek to deepen local content, but would set the numbers in such a way that it was “reachable, doable and encourages positive change” without driving investors away.
- BUSINESS REPORT