The South African automotive industry has been set new and challenging targets in the government’s revised Automotive Production and Development Programme (APDP). Parliament recently extended the current APDP to 2035, adding updated targets that will encourage local growth of the sector.

One such target is to increase locally-manufactured parts on South African-built vehicles from 40% to 60%. These targets aim to stimulate economic growth, job creation and support from the government. The updated APDP is the result of months of consultation and negotiation between the automotive industry and the national government.

While there are tough targets outlined in the programme, the intent of the revision is good. Vehicle manufacturers will need to work hard to phase in the new changes in order to meet the requirements of the APDP.

Challenges facing the automotive industry

Additional challenges arise in the form of logistics, electricity supply and port congestion – all of which are out of the control of the original equipment manufacturers (OEMs). The processes at OEMs will need to be streamlined and the manufacturing cycle will need to be tightened and fine-tuned.

The government hopes to push the automotive industry and stimulate growth to 1% of global vehicle production by 2035. This equates to about 1.4-million vehicles per year – almost double what it is today. The original APDP set in 2013 set the target of 1.2-million vehicles per year by 2020.

Government determines key targets

Reaching these targets will require intense collaboration and harmony between OEMs, the labour force and the government. The national elections in May 2019 will determine the future direction of the industry and produce certainty for the next five years when the new government takes seat.

“While [the APDP] has supported investments of R8.2 billion annually and while it has supported growth and employment in the industry, we took a deep dive analysis and we concluded that South Africa still remains a relatively small market in global terms,” says Minister of Trade and Industry Robert Davies.

“We had to wrestle with issues among ourselves and I think we have come up with something that everybody at the end of the day will be able to live with, which I think is broadly something stakeholders in the industry subscribe to,” he explains.

“We need to deepen local content. In addition to that, we can establish the point of entry for small black-owned companies in the value chain,” argues Davies. More local businesses entering the industry means more job creation and South African-made parts.

The revised APDP has set ambitious targets but the timeline has been extended. OEMs and the government will be working closely to achieve the goal set out in the programme and, while the road ahead will be challenging, the automotive industry will ultimately benefit.

Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.

Formex specialises in producing components for the catalytic converter industry, as well as metal components and assemblies for the various vehicles. Formex aims to become one of the foremost suppliers for the South African automotive industry by 2035, aligning itself with the South African Automotive Masterplan (SAAM) which takes effect in 2020.

Formex is a Level 2 B-BBEE supplier with over 80% black ownership, of which more than 40% are black women. The company is owned by Deneb Investments Limited – a subsidiary of Hosken Consolidated Investments Limited (HCI) – one of South Africa’s biggest true B-BBEE companies listed on the Johannesburg Stock Exchange (JSE).

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