We need to look at the smaller components that contribute to the bigger picture.
The road to localising South Africa’s automotive industry has been long and often tedious for all stakeholders involved but the wheels have been turning making it the perfect time for newcomers in specialised industries to prepare themselves for opportunities.
Localisation of South Africa’s automotive industry, currently largely owned by international multinational companies, has long been part of the government’s economic transformation agenda.
Covid-19 disruptions in both local and global supply chains have not only accelerated the drive to localise the automotive industry it has also highlighted the importance of opening up the sector to new, local, and black-owned industry drivers in the various stages of the vehicle manufacturing process.
One of the biggest challenges facing new entrants in the auto sector is high and stringent standards for manufacturing any component that goes into a vehicle – as it should be seen that we are putting our lives at risk every time we get into a car. This doesn’t mean South Africa is not contributing to component manufacturing as a whole, in fact, recent figures show we are quite competitively playing in the area. There was over R54 billion worth of components exported just last year from South Africa, with a significant amount of that going to the European Union, proving that South Africa can develop manufacturers at a competitive rate for local, regional and international markets.
The stringent standard challenges create the ideal unique opportunity for black-owned manufacturers in totally different market sectors. Black industrialists need to start to see the opportunities in augmenting their factories to include manufacturing for the automotive sector.
Often local manufacturers feel intimidated by the automotive sector due to the different value chains associated with the assembly process, but manufacturing can be aligned through components such as the plastics that go into the vehicle or the leather used as seat material. It’s time perhaps for the emphasis to be placed on the smaller components that essentially also contribute to the whole vehicle.
It helps large component manufacturers and vehicle assemblers a great deal when they see newcomers in the space having some sort of track record specific to quality standards.
Our advice is that local and black-owned manufacturers need to align themselves with the appropriate engineering firms that can assist their operations to increase their standard qualification to meet the automotive sector’s standards as well as appropriate funding partners that can help invest in capatilising the augmentation of their facilities.
Through the Automotive Transformation Fund, the sector is making the right moves in a bid to localise the industry. In partnership with the Department of Trade, Industry, and Competition the sector established a R6 billion fund for black business.
The fund is established as an equity equivalent programme where the seven OEMs (Original Equipment Manufacturers) currently operating in the country (BMW, Ford, Isuzu, Nissan, Toyota, Mercedes-Benz and Volkswagen) contributed a certain value and committed a quantum of investments into it to help transform the value chain in the respective entities
What makes the fund interesting is that:
- It was setup to address the challenge of the dilution of black equity shareholding in the participating EOMs, and
- it is not only available for black businesses in the manufacturing space but any black business servicing the automotive sector
The opportunity here is not just for the OEMs but a much bigger opportunity exists for black businesses to get in touch with the procurement and transformation divisions of the OEMs to get a head-start to viable business opportunities.
It is well known that you should eat an Elephant piece by piece. We believe the opposite stands to be true as well: for the Automotive Masterplan to succeed black businesses should look past the final products assembled and into the smaller parts going into the assembly process. It might just be in those smaller parts where the bigger opportunities lie.
Next time you get into a vehicle, take a hard look to find the augmented opportunities for your business. It might be at arm’s length, under your feet, or just there: right before your eyes.