Skills are a critical requirement to sustainably allow for the establishment and development of local black suppliers to the automotive industry.
Most of the suitable entrepreneur candidates to establish and run local component manufacturing and supply operations will come from the automotive industry, says industry body National Association of Automotive Component and Allied Manufacturers (NAACAM) VP Arthur Mtombeni.
“Developing and sustaining suppliers requires that the entrepreneur has the necessary skills and industry experience, as well as entrepreneurial skills and drive. “Therefore, we expect that new suppliers will have to be developed from within our industry and will depend on experienced people who want to run their own businesses.”
There is no quick way of developing tier-one local black suppliers for the automotive industry or further downstream manufacturers and suppliers to tier-one suppliers. This is compounded by economic and industrial conditions that are not conducive to the development of new black suppliers, as well as the lack of a productive base in allied industries or general manufacturing on which to build local component manufacturers and suppliers, he says.
“There is limited room for the automotive component industry to fund the development of industry suppliers and there must be a focus on defining the automotive component supplier industry to determine where spending will most effectively support the development of sustainable and competitive suppliers,” emphasises Mtombeni.
While the commitment to transforming the automotive components industry is recognised as a necessary element of sustainability, new entrants to the industry will require support. This must, by necessity, be derived from the whole industry to improve the scale of the impact of funds, which can entail providing access to customers’ supply chains through, for example, offtake agreements.
“Suppliers need critical mass to be sustainable, which requires that they have customers and sufficient surplus capacity to sustain themselves as and when their order book grows,” says Mtombeni.
The Automotive Masterplan 2035 is aimed at ensuring that the country develops a strong and competitive supply base. This should help to ensure that it can satisfy new export demand, as well as sustain its exports worldwide.
However, its main objective is to ensure that the country develops suppliers for national demand using local industry constituents and to deepen and widen localisation.
Wider localisation entails that more suppliers can meet original-equipment manufacturer demands and quality standards, while deeper localisation ensures that as many of the components and raw materials as possible are produced in South Africa and also meet quality standards.
“We have shallow localisation in tier-one suppliers, and an almost non-existent tier-two. This is the area we consider to hold potential to bolster local content in the vehicle and automotive supply chain,” highlights Mtombeni.
It is difficult to create a competitive supply chain that can bring benchmarked parts to the market at competitive prices amid increasing input costs, such as energy prices that increase by up to 20% a year. Increasing input costs mean that suppliers are less competitive against global benchmarks.
“This is why we have to look for other levers to make us more competitive. We are no longer a cheap labour market, and increases in input costs reduce our ability to sustain wage growth and can be a threat to smaller suppliers’ sustainability.
“Investments into the local automotive industry by original-equipment manufacturers and industry suppliers must make economic sense,” emphasises Mtombeni.
The need for economically feasible investments, such as in local supplier development, will determine which components can be produced locally for local original-equipment manufacturers and, hence, the pace of deeper localisation.
The local automotive industry supply chain, including original-equipment manufacturers, can serve as technology partners for local suppliers and act in concert to boost existing suppliers’ and new suppliers’ skills and to advise on technology changes in the industry.
Any suppliers and manufacturers in the automotive component manufacturing industry must be globally competitive to ensure their long-term sustainability, including quality standards required for aftermarket components, and to secure customers.
This, again, necessitates that high-level skills – both technical and financial – are in place within the supply chain and in new and emerging suppliers, he says.
In this regard, one of NAACAM’s roles is to facilitate technology partnerships, help make available the capacity of original-equipment manufacturers’ to develop skills available to the component manufacturing industry and enable wider localisation in line with the defined strategies of these multinational companies.
NAACAM has identified key areas for potential wider localisation through which it believes the Automotive Masterplan 2035’s localisation objectives can be accelerated, in line with the financial and quality requirements of original equipment manufacturers and the needs of local tier-one suppliers.
“By leveraging the input of roleplayers in the value chain, NAACAM can play a key role in facilitating the development of the local economy, as well as competitive and sustainable local suppliers to meet the evolving, long-term needs of the automotive industry,” he concludes.