The South African Automotive Master Plan (SAAM) envisages growing local content in South African assembled vehicles from around 37% (as of 2015) to 60% by 2035.
“To meet this objective, the South African automotive industry needs to create 485 new businesses in Tier 2 automotive products by 2035,” says Rand Merchant Bank (RMB) automotive sector head Simon Woodward.
“Of that, 50% needs to be locally owned and black owned.”
Tier 2 businesses typically supply parts to Tier 1 component makers, which then supply their parts or subassemblies directly to vehicle manufacturers.
RMB describes localisation as the process whereby an increased percentage of the parts and costs of a motor vehicle are either assembled or manufactured in South Africa rather than imported.
This increased localisation represents an opportunity to expand the automotive sector, while also facilitating the entry of black economic empowerment (BEE) participants in its supply chain, as demanded by government’s Automotive Production and Development Programme.
Apart from increased localisation, SAAM also hopes to see the automotive industry grow from producing 600 000 vehicles a year to 1.4-million vehicles a year.
“Localisation is an essential ingredient in transforming the domestic automotive sector,” says Woodward.
“It is a massive opportunity to support black-owned automotive suppliers in building their businesses in the industry, and then potentially partnering with leading global suppliers. It will help drive transformation and create jobs.”
Encouragingly, he adds, vehicle manufacturers have set up a transformation fund, which will help in part to facilitate the entry of BEE participants in the supply chain.
* Woodward spoke during a recent automotive sector webinar held by FirstRand Group companies RMB, First National Bank and WesBank.