File Image: Trade and Industry Minister Rob Davies.  (ANA)
File Image: Trade and Industry Minister Rob Davies. (ANA)
VW production in Port Elizabeth. VW plans integrated mobility in Rwanda.Photo: Simphiwe Mbokazi
VW production in Port Elizabeth. VW plans integrated mobility in Rwanda.Photo: Simphiwe Mbokazi

JOHANNESBURG - South Africa’s automotive industry appears to be on a collision course with the government over compliance with the new broad-based black economic empowerment (BBBEE) codes.

Trade and Industry Minister Rob Davies said yesterday that his department had already indicated to the vehicle sector that it was required to achieve a Level 4 BBBEE grading if it wanted to draw on the benefits of the Automotive Production and Development Programme (APDP).

However, Volkswagen South Africa chairperson and managing director Thomas Schäfer warned in October last year that South Africa could say goodbye to its automotive industry if the government insisted on enforcing the revised BBBEE codes on locally based multinational vehicle manufacturers. Schäfer 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.

In August this year, Schäfer repeated the warning, stressing that vehicle manufacturing in South Africa would grind to a halt if the government linked the incentives and benefits of the APDP and Automotive Incentive Scheme (AIS) to the empowerment ratings of global multinational companies that produced vehicles locally. “Nobody wants to be non-compliant. We would love to be Level 4 but it is physically impossible with the current rules.”

VW production in Port Elizabeth. VW plans integrated mobility in Rwanda.Photo: Simphiwe Mbokazi

Schäfer said all the global vehicle manufacturers with manufacturing facilities in South Africa had a Level 8 BBBEE rating. Speaking at the launch and commemoration of an equity equivalent investment programme in South Africa by multinational earthmoving equipment manufacturer Caterpillar yesterday, Davies stressed it was no longer an option whether government departments and entities applied the codes, it was now a requirement.

He said there a time period in which the vehicle manufacturers had to comply, which was a similar model to Caterpillar’s programme. Davies said a number of vehicle manufacturers had already indicated that they were involved in supplier development and he had participated in a Volkswagen exhibition last year to identify potential black-owned companies that could participate.

“We don't have black-owned companies at the moment that are component manufacturers in the vehicle sector but there are engineering companies of one sort or another that are close and can be mentored and upskilled to participate,” he said.

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Davies said vehicle companies such as BMW and Toyota were also developing supplier parks. “The model is a similar model and there are quite a few things that are happening there as well,” he said.

Senior office-bearers of the National Association of Automobile Manufacturers of South Africa (Naamsa), the representative body of new vehicle manufacturers, announced in June that the industry planned to establish a R3.5billion transformation fund that would allocate funds to develop black ownership in the car industry supply chain and vehicle dealership network.

Industry sources subsequently informed Business Report that the industry was lobbying the government to accept this planned transformation fund as an equity equivalent initiative for the ownership pillar of the new BBBEE codes.

Tim Abbott, the chief executive of BMW Group South Africa and sub-Saharan Africa, said at the Naamsa briefing in June that the fund would be held through a black fund manager with a board of management that included original equipment manufacturers and the government through the trade and industry department.

He said money would be allocated to develop black ownership in the industry supply chain and dealerships and to give financial and management support.

- BUSINESS REPORT