The inaugural National Association of Automotive Component and Allied Manufacturers of South Africa (Naacam) Show, which will take place at the Durban International Convention Centre from April 5 to 7, 2017, is set to advance the interests of local manufacturers.

Naacam president and automotive glass manufacturer Shatterprufe MD Dave Coffey says the Naacam Show is going to be an event “for suppliers, run by suppliers”, adding that South African manufacturers will be at the forefront of the event.

A key objective of the Naacam show is to facilitate a platform to share localisation successes and case studies to generate ideas and create momentum. “Localisation must not only happen at original equipment manufacturer (OEM) level, but also at Tier 1 level, and even deeper into the supply chain,” he says, adding that localisation creates commercial opportunities and generates much-needed employment in the supply chain. Advantages of localising manufacturing include an absence of foreign currency exchange-rate volatility, stable local pricing models, reduced lead times or working capital and improved value-add.

The Naacam Show will feature a strong contingent of Tier 1 suppliers, which will attract OEM global purchasing managers, thereby enabling them to better understand the local capability of the components manufacturers in the entire supply chain, according to Coffey.

In addition, with increased activity in the automotive components sector come enhanced opportunities for black-owned suppliers to participate in the automotive sector, especially in the Tier 2 and Tier 3 manufacturing supply space, he adds.

The greatest challenge currently facing the domestic automotive components manufacturers industry is the effort required to remain globally cost competitive while continuously investing in new product and process technologies in an environment where “real costs are increasing at a much higher rate than prices are recovering and, in many instances, components prices are decreasing due to competitive global forces”, says Coffey.

Another contributing factor is that the rand’s volatility makes business planning difficult, while slow economic growth and consequent declining local vehicle sales have had a negative impact on economies of sales.

“Further, the global purchasing strategies of OEMs have trended towards using single-source suppliers, and this, in turn, makes it very difficult for domestic companies to always be in the frame when these decisions are made,” says Coffey.

To overcome these challenges, he points out, a business is required to have a strong, “deeply rooted” culture of continuous improvement that challenges every element of waste in the business continuously and systemically. “It also requires a business to grow its volume base from its current or similar overhead structure.”

Therefore, Coffey says, it is critical for local components manufacturers to participate in the OEM export programmes or to be direct exporters. “Those that have the right attitude and great leadership will succeed.”

He adds that local manufacturers also need to understand the way global value chains are evolving and, in turn, do all that they can to ensure their value propositions are suited to global OEM purchasing needs.

In terms of transformation strategies, Coffey says it is “absolutely vital” in the automotive value chain to encourage and implement these strategies, thereby enabling a company to develop black industrialists who can participate in a meaningful way in South Africa’s manufacturing space.

However, he highlights that, with a significant number of global multinationals operating in the South African automotive manufacturing space, the issues around equity transfer are not easily or cost effectively resolved.

Coffey explains that compliance with the new Codes of Good Practice of the amended Broad-Based Black Economic Empowerment (BBBEE) Act has been linked to incentive disbursement across government.

For instance, he says, for the Automotive Investment Scheme grant – which most automotive suppliers depend on for upgrading and new investments – a minimum level of compliance is specified. To achieve this level does not require an organisation to sell equity in its business. “What is important is to understand the real opportunities within the various elements of the scorecard to improve one’s BBBEE rating,” Coffey adds.