The biggest goal of newly appointed National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal is to increase the participation of black South Africans in the country’s automotive sector.
He says there are “opportunities to drive transformation mainly within the tier two space. It is possible to bring in a cache of black industrialists, reshaping the owner dynamics within this sector”.
The automotive sector typically comprises global, multinational vehicle manufacturers, also called original-equipment manufacturers, or OEMs, which are provided components by a range of suppliers. The biggest of these suppliers are tier one manufacturers, which are largely multinational companies. Manufacturers that supply subcomponents to tier one suppliers are tier two, three and four suppliers, depending how far down the value chain they are.
Tier two, three and four companies are attractive targets for black ownership, as they are largely not multinational companies.
Multinationals are allowed to achieve their empowerment targets by means other than ownership.
Given the levels of government support for the automotive industry through the current Automotive Production and Development Programme (APDP) – as well as the proposed 2035 Automotive Masterplan – it is expected that government will push the automotive sector towards greater demographic representation, with the most realistic way for this to happen being through the lower-tiered component sectors, says Moothilal.
“It is possible, given current fiscal constraints, that the demands for more inclusive levels of representation, among others, will be more stringent going forward. Importantly, however, all stakeholders are clear that the local automotive sector is unlikely to survive without appropriate, balanced government support.”
Moothilal points to the demise of the Australian automotive sector as a case in point.
Outside of the well-known APDP levers, Moothilal says Naacam will tap the Department of Trade and Industry’s (DTI’s) Black Industrialist Programme, among others, in an attempt to establish black tier two suppliers. He also maintains that the broad-based black economic empowerment (BBBEE) codes and legislation have to be used as “tools of industrialisation”.
He believes there is room for new component makers in the South African automotive sector, especially as the Automotive Masterplan currently being drafted by government and the automotive industry aims to increase automotive parts localisation.
Moothilal’s second goal as executive director links to this. He would like to see a deepening of the use of parts manufactured in South Africa, with many parts still being imported by OEMs and several global tier one component manufacturers.
“We must deepen our value chains.”
A range of government policies, such as the Motor Industry Development Programme, implemented since 1995, and its successor the APDP, managed to set a strong base for the vehicle assembly industry to become one of the country’s prominent manufacturing industries. Growth within the components subsector has, however, not entirely followed a similar trajectory, says Moothilal.
In fact, while the local sector has established segments of excellence in certain tier one categories, it has experienced “serious hollowing out”, especially among tier two and tier three component makers, diminishing their contribution to the automotive industry.
Another of Moothilal’s main goals as new Naacam executive director is to “refresh and reinvent the Naacam value proposition to its members”.
A recently delivered initiative in this regard links to the goal of improving empowerment within the components sector.
“We have been doing a lot of work on educating and assisting our members to increase their performance on their empowerment scorecards,” says Moothilal.
“Many of our members were not ready for the shift required by the revised empowerment codes issued by the DTI – this while the DTI has indicated that there is no room not to comply.”
Naacam has been hosting best practice workshops to guide its members in finding cost-effective ways to fulfill certain of the BBBEE priority scorecard elements.
The first ever Naacam branded show in 2017 is another initiative aimed at driving the membership value proposition. Moothilal believes the show will be a “great platform for the sector to showcase its true capability”.
The themes of growing localisation and black supplier development will be at the heart of the show’s agenda.
Moothilal would also like to capture more companies within the components sector as members of Naacam, with membership currently representing around 65% of recorded component production.
He also speaks of the need to build the public profile of the component sector.
“The bulk of the auto sector’s value addition, as well as the associated economic outcomes, including employment, happens in the components sector. There is a good story to be told, but we need to be getting that story out effectively and consistently in the public space.”
Moothilal exited the DTI, where he worked within the automotive policy unit, to join Naacam. He is an economic development professional.