South African automotive industry executives reaffirmed their commitment to industry transformation during meetings with African National Congress (ANC) leaders this week, at which they also presented an outline for a proposed R3.5-billion venture capital fund to support black enterprise development in the sector.

Following the discussions, a media briefing was hastily convened and presided over by ANC treasurer-general Zweli Mkhize, ANC head of economic transformation Enoch Godongwana, BMW South Africa and sub-Saharan Africa CEO Tim Abbott, Nissan South Africa MD Mike Whitfield and Toyota South Africa Motors CEO Andrew Kirby.

The original-equipment manufacturers (OEMs) indicated that they planned to raise the share of local content to 60% by 2035, from 38% currently.

The meeting preceded the governing party’s policy conference, which is due to take place in Johannesburg from June 30 to July 5.

Much of the deliberations at the conference are expected to focus on defining the concept of “radical economic transformation”, which is being highly contested internally. However, there was already broad-ranging consensus that economic transformation to de-racialise the domestic economy should be accelerated.

The discussions between the OEMs and the ANC follow the recent disinvestment from South Africa by General Motors, but also come amid ongoing work on a new post-2020 Automotive Master Plan. In return for continued government support, the plan will set out new reciprocal obligations for the industry relating to production, local content, exports and transformation.

The sector is currently incentivised through the Automotive Production and Development Programme, or APDP, and the Department of Trade and Industry (DTI) has indicated that it plans to finalise and present the new master plan to Cabinet during 2017.

Trade and Industry Minister Dr Rob Davies reported in May that, with the APDP due to expire in 2020, the DTI was “engaged in an inclusive consultative process with all key stakeholders to develop an Automotive Master Plan that will inform our motor industry programme thereafter”.

Davies also stressed the need to deepen and strengthen local component manufacturing, which he described as the “most job rich part of the automotive value chain”. He also indicated that some of the beneficiaries of government's Black Industrialist Programme would be located within the automotive component sector, where the DTI was encouraging OEMs to integrate black enterprises into their supply chains.

National Association of Automobile Manufacturers of South Africa director Nico Vermeulen told Engineering News Online that the OEMs had reaffirmed their commitment to transformation and black economic empowerment (BEE) during a recent working dinner with the ANC. However, they had also raised their difficulties, owing to their multinational status, in selling shares to black investors.

Therefore, the companies were proposing an "equity-equivalent" scheme, whereby an ‘OEM Venture Capital Fund’ would be created to support black-owned enterprises across the automotive value chain, including component manufacture.

The R3.5-billion fund would be capitalised through equal contributions from the seven participating OEMs and it was envisaged that it would be managed by an independent black-owned fund management company.

However, Vermeulen stressed that the details were still the subject of negotiation with the DTI, including how the equity-equivalent investments would be reflected on government’s empowerment scorecard.

He also stressed that the fund would be additional to the various initiatives already being undertaken by individual OEMs to support education and training, supplier development and employment equity.

Once the industry had DTI “sign off” it would move ahead with implementation, possibly as early as 2018.