PRETORIA – About 99 percent consensus had been reached with the automotive industry about the new master plan that would replace the current Automotive Production and Development Programme (APDP) from 2020 and run through to 2035.
Lionel October, the director-general at the Trade and Industry Department, confirmed this at a National Association of Automobile Manufacturers of South Africa (Naamsa) conference held during the Festival of Motoring at Kyalami on Friday.
October added that the technocrats were “working out the finishing touches” to the master plan and “to put in some of the final details around the exact targets around the local content” requirements.
“There is consensus that we are heading towards those targets of 60 percent (local content) and we are looking forward to the value add localisation.
“We are extremely close and there should be an agreement very shortly and then we will proceed to the cabinet (for approval) to announce the master plan. We have the outline of a clear plan for how to take the industry to 2035 and also how to transform this industry,” he said.
October said the big goal had always been to increase automotive industry production volumes, because with volumes came economies of scale, which made the industry competitive and also allowed it to localise and have higher local value addition.
He said the industry had reached a key point now with about 600 000 vehicles produced each year, but needed to increase that to the critical barrier of 1 million vehicles a year before it could claim it was an embedded industry.
October said in the manufacturing sector, especially in the automotive sector, there had been a big lag in transformation compared to other sectors. This applied not only to ownership, but also to supplier development, bringing black firms into the supply chain, enterprise development, skills development and bringing black employees into senior management and senior skilled occupations.
“We (auto industry) are unfortunately the worst performer of all the sectors,” he said.
But October said there was agreement in terms of the master plan that the automotive industry would move to level 4 under the black economic empowerment (BEE) scorecard by 2020 or 2021.
“The industry has come up with very innovative proposals and plans. We have already adopted the idea of creating a fund for the industry to drive empowerment and are looking at the equity equivalent programme.
“That is where there will be support for black ownership in the supply chain,” he said.
Jeffrey Dinham, an economist at Econometrix, said the drop in the BEE status of the automotive industry was because of revisions to the generic scorecard and ownership given penalty points if certain sub-minimum levels were not reached.
He said ownership was the laggard but this was always going to be a contentious issue with foreign-owned multinational ownerships not prepared to give away equity.
Dinham said ownership was the problem, with the manufacturing sector having an overall BEE status of level 6 compared to level 8 for the original equipment manufacturers (OEMs).
But Dinham said the OEMs were not resting on their laurels and there were talks on the equity equivalent programme and around a R3.5 billion fund to build black enterprise development, which was likely to result in the full 25 points being awarded for ownership.
“If that happens, the OEMs' BEE potential would rise from a level 8 contributor to a level 4,” he said.
- BUSINESS REPORT