A Toyota production line in Durban. Automotive industry executives announced last week that the seven original equipment manufacturers in the country had plans for the creation of a transformation fund.Photo: Simphiwe Mbokazi
South Africa’s automotive industry is to lobby the government to accept its planned R3.5billion transformation fund as an equity equivalent initiative for the ownership pillar of the new broad-based black economic empowerment (BBBEE) codes.

Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa (Naamsa), the representative body of new vehicle manufacturers, said on Friday that the idea of establishing a sector code had been abandoned and the seven locally based original equipment manufacturers (OEMs) would operate independently in terms of the generic BBBEE scorecard.

However, Vermeulen said these OEMs had a major challenge in regard to ownership, because they did not have any equity for sale as they were wholly-owned subsidiaries of global multinational companies.

“In that regard, the OEM venture capital (transformation) fund was formulated and is now the subject of discussion and negotiation with the Department of Trade and Industry (dti),” he said.

Jeff Nemeth, the former chief executive of the Ford Motor Company of South Africa and president of Ford sub-Saharan Africa, told Business Report in 2015 that multinationals did not like to dilute their brands and found the ownership pillar in the new codes “very onerous”.

Nemeth said most sector specific codes had been more onerous than the general codes and this was one of the issues the industry would have to work its way through.

The automotive industry executives announced last week that the seven OEMs in the country planned to create a transformation fund that would allocate funds to develop black ownership in the car industry supply chain and vehicle dealership network.

They also provided details of the industry-developed vision and master plan to 2035.

Details about the fund and master plan were revealed at a media briefing last week addressed by ANC treasurer-general Zweli Mkhize, ANC economic transformation sub-committee chairperson Enoch Godongwana and the three automotive company executives.

It followed discussions between the parties ahead of this past weekend’s ANC’s policy conference.

Mkhize declined to respond to specific questions from Business Report about whether the ownership pillar in the BBBEE codes had been discussed during the meetings last week with automotive industry executives.

“We won’t go very far into that except to say we dealt with the broad principle of what transformation is about. We are not going to go into a lot of other sticky issues because that is between the government and OEMs. Our point has been that the general attitude towards transformation (by the automotive industry) is a lot more positive than what we would have expected,” he said.

Naamsa president Mike Whitfield said they would be having a lot of work groups with all the stakeholders.

Car industry sources approached by Business Report, who did not want to be identified, cast doubt on the industry being ready to host the planned summit about the fund in July, which was announced at the briefing.

The sources said the establishment of the fund was still in the conceptual phase, negotiations with the dti about the fund were at an early stage, the key performance indicators had not been agreed or finalised and the dti had not signed off on the process.

“The industry is looking for 25 ownership points from establishing the fund. It’s uncertain whether the dti will accept that R3.5bn, split equally between the companies over a 10-year period, qualifies for 25 points in terms of ownership.

“The companies are not going to put hundreds of millions on the table if they do not get the (ownership) points benefit they are looking for,” one source said.