Norinco Motors looks set to be the first Chinese company to operate a vehicle assembly plant in South Africa.

This comes as the JSE-listed Super Group is in the process of selling its commercial vehicle business, housed in the loss-making Super Group Industrial Products (SGIP) division, to China North Vehicle Corporation Limited (or Norinco Motors), says Super Group CEO Peter Mountford.

The parties have signed a letter of intent in terms of which Norinco Motors will, with Super Group, establish a new Commercial Vehicle Assembly and Distribution Entity (CVADE).

In terms of the proposed arrangement, Super Group will contribute certain assets – such as the land and buildings comprising the existing assembly plant in Pietermaritzburg – to CVADE, in exchange for an up to 30% equity interest in the business.

Norinco Motors will hold at least a 70% equity interest in the business.

Following the completion and approval of the deal, CVADE will take over the responsibility for the assembly and distribution of the Chinese Powerstar range of trucks in South Africa and Africa.   

China Construction Bank Corporation's Johannesburg branch has agreed to provide bridging finance to Super Group to settle the outstanding liabilities related to the assembly plant, and to ensure that the company is able to contribute all the stated assets to CVADE.

The sale of Super Group's commercial vehicle business comes as a result of  continued losses in the SGIP division, and Super Group's inability to inject further cash into the business, as well as the need for a strategic partner that will be able to grow the business with adequate working capital contributions.

Super Group as a whole is to restructure and focus on its core supply-chain business, says Mountford.

“Arguably, Super Group Industrial Products should have been closed a long time ago,” he adds.

SGIP lost the company R1,2-billion, post financing costs, over the last two financial years.

SGIP was formed in 2007 as a result of a merger between Super Group Equipment, Super Group Commercial Vehicles, MMS Cranes, Hermans Truck Accident Repair, Cargolite and Africa Truck Assemblers.

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