All dressed up for auto plan journey with no satnav

Documents with the fine print to guide manufacturers on implementing the programme are missing

It would be a little odd to embark on a journey in a car with only three wheels, a satnav with a blank screen, and no clear idea of how you will get to your destination or what will be needed to complete the journey.

This is why the department of trade, industry & competition’s new auto industry blueprint, the Automotive Production and Development Programme Phase 2 (APDP2), should be coloured in.

After some delay the APDP2 regulations have been published and officially gazetted, which is real progress. However, the procedural documents that contain the fine print to guide manufacturers on how to apply and actually implement the APDP2 within their own IT systems and business processes, are missing.

The devil of the detail sits in these documents. They are the blueprint for action for automotive assemblers and component manufacturers — they contain the real nuts and bolts.

It is not unusual for the government to publish a new policy document and leave the fine print to later. However, this time there is a special urgency. There has already one delay in the implementation of the APDP2 regulations, which are vital for the road ahead.

Without the detail there is no clear indication of what the crucial changes are, or what is needed before the actual implementation of APDP2 in July. This ticking clock poses a big practical problem for vehicle manufacturers and the many component manufacturers on whom they rely.

We are talking about complex, detailed reporting and recording mechanisms intended to assure the authorities that companies are implementing the agreed guidelines. This requires elaborate changes to internal management reporting systems, as the fundamental measurement aim has changed to allow for increased localisation.

How you change systems; how you measure things — it just can’t be done without a detailed blueprint, and this requires this full set of detailed procedural documents. These changes don’t happen overnight and cannot be implemented without validation and testing, despite the modern wonders of IT.

Clobber you

Participating firms need to know not just how to accurately measure and record information about what they themselves are needing to do, but they must also be confident about getting the same level of detail from suppliers, so they can incorporate it into their systems. For example, precision is needed in the recording of imported and locally procured raw material usage and utilisation in the production process.

The auto master plan enables companies to claim support, but to do so they will need to get everything in place to ensure accuracy and the integrity of the data points that need to be reported. As this is a multibillion-rand support programme, small errors will become big rand numbers. The SA Revenue Service will clobber you if you overclaim, but you will lose out if you underclaim.

The automotive assemblers and component manufacturers will need to fully brief their supply chain, IT, procurement, finance and tax people. But the substance of that brief should come from the government — in these overdue procedural documents for which we are still waiting.

In terms of the move to more stringent broad-based BEE (B-B BEE) compliance requirements, the guidelines do not reflect what has been floated in the public domain about the phasing-in of increased compliance levels from level 8 to level 4. As it is still unclear if and when this will be confirmed by the department, it is only conjecture at this point.

Empowerment is not an overnight process. The sooner you start, the less likely you are to miss the targets. BEE improvement initiatives require careful planning and take time if a company is to realise the resulting benefit on a B-BBEE certificate.

No clarity

President Cyril Ramaphosa and trade, industry & competition minister Ebrahim Patel take every opportunity to laud the auto master plan, which was the first in a series of sectoral strategy and support schemes that have been negotiated with industry and other stakeholders.

It contains lofty goals — the doubling of production, higher local content in SA-assembled vehicles, growing employment, the upskilling and empowering of the local workforce. The master plan is a big vision, designed to ensure the auto sector remains the engine of SA’s manufacturing turnaround. But vision is of no use if there is no clarity on how it is to be implemented.

The situation is getting urgent, and the hope is that the industry won’t have to wait too much longer for the absent fine-print of the legislation.

It is not all doom and gloom though. We do have some clarity on issues such as the door being opened for local auto manufacturers to provide knock-down kits for export and final assembly elsewhere.

The motor manufacturing sector will spearhead the move towards greater industrialisation on our continent, bringing concrete credibility to the recently launched African Continental Free-Trade Area (AfCFTA).

Some of the big manufacturers will be setting up plants in the rest of Africa. One example is Volkswagen, which has established assembly plants in Rwanda and Ghana.

This will provide the opportunity for SA manufacturers to supply components to the assemblers across Africa — for use in assembling vehicles in their territories, and to meet their local demand for spare parts and accessories. These SA component manufacturers can attract APDP2 benefits by supplying to cross-border destinations in both instances.

It is a daunting task to set up a full automotive manufacturing plant, and this will clearly not happen everywhere. While AfCFTA might not bring full factories, it will enable the setting up of more assembly plants.

SA’s motor manufacturers are not just going to grow and develop in this country, but now they have a vision for the continent. What they need is for the government to lift the veil of uncertainty and publish the detailed APDP2 procedural documents as soon as possible.

• Jessup is an incentives manager at Cova Advisory.