Government and the automotive industry have reached “99% consensus” on the South African Automotive Masterplan, says Department of Trade and Industry (DTI) director-general Lionel October.
“We are close. We are 99% there. We are just finalising the targets.”
The Masterplan will guide policy on growing and supporting the domestic automotive industry from 2020 to 2035, taking over from government’s current Automotive Production and Development Programme.
Speaking at the National Association of Automobile Manufacturers of South Africa conference in Midrand, held on Friday, October said technocrats were “putting the final touches on the Masterplan and working out the final targets on local content”.
“It is safe to say that we are extremely close and that there should be an agreement very, very shortly.”
Once an agreement was reached, the Masterplan would proceed to Cabinet for approval, he noted.
October said South Africa “really had only two manufacturing sectors” – textiles, clothing and footwear and the automotive industry.
“We have lost large parts of our steel industry. We must make a success of taking our auto industry to the next level. It is the base of our industrialisation. It has massive forward linkages into steel, rubber and chemicals.”
October noted that the Masterplan aimed to increase the volumes of vehicles and components produced in South Africa.
“With volumes come economies of scale, which makes you competitive and allows you to localise.
“Volumes are critical and we have reached a key point now with 600 000 vehicles, but we need to hit that mark of 1-million vehicles [production a year].
“We need to cross that barrier if we want to really have an embedded auto industry.
“And then, with volumes, comes increased local [parts] content. And I think there is now consensus that we are heading towards those targets of 60%.”
Apart from localisation, government was also focused on increasing black participation in the industry.
“What we have found is that in this sector – automotive and manufacturing – there has been a big lag,” said October. “Other sectors have moved way ahead of manufacturing in terms of transformation.”
He noted that transformation referred not only to ownership. Included were creating black-owned companies within the supply chain, enterprise development and the promotion of skilled black employees into senior management positions.
The automotive industry was “unfortunately the worst performer” in terms of black economic empowerment.
“There is now an agreement that industry will move in a few years, in 2020, 2021, to level four on the empowerment scorecard,” said October.
Local vehicle manufacturers, as a sector, was currently at level eight.
October said the automotive industry had committed to doing this, and had already come up with a number of “innovative proposals” to do so. These included a venture fund and an equity equivalent programme.
“Transformation is key,” said October.
“The talk about land is not necessarily about land, it is symbol for something else. It is a symbol of exclusion.
“If we look at South Africa we must be very worried that populism will arise unless we do not quickly address transformation and inclusion.”
October believed that the establishment and growth of the South African automotive industry could be described as “an outstanding success”.
“It shows what we can build as a country if we work together.”
He added that the automotive sector was the backbone of South Africa’s manufacturing industry, making up more than half of the manufacturing sector. It employed more than 100 000 people and contributed more than 7% to the country’s gross domestic product (GDP).
He said South Africa had a small manufacturing base, at only 13% of GDP.
“To be middle income country you have to have a manufacturing sector that is at least 20% and above.”