The Department of Trade and Industry (DTI) has implemented numerous changes and targets to the revised South African Automotive Masterplan. The new plan will come into effect from January 2021 and will focus on goals to reach by 2035 – one of which is to increase locally-made parts on vehicles to 60%.
The department worked closely with key players in the automotive industry to establish the new masterplan. Director-general of the DTI, Lionel October, says that boosting manufacturing through more local content and higher output volumes were key goals of the revised masterplan.
“Higher production volumes result in economies of scale and improve an industry’s competitiveness, which impacts on its ability to localise components, with 60% local content being a Masterplan target,” says October. “It is therefore very important that we hit the point where we are producing more than a million vehicles a year in South Africa, rather than the current level of about 600 000,” he explains.
New target of local content are ambitious but achievable
Minister of Trade and Industry, Rob Davies, says that the 60% local content target is ambitious. The goal was the outcome of years of robust and collaborative engagement with the industry.
South Africa is currently producing about 40% of the parts used for locally-manufactured vehicles. An additional 20% is needed by 2035 if the vehicle and parts manufacturers are to achieve their goals.
Revised APDP aligns with the automotive masterplan
This drive for more local content has also been included in the changes to the Automotive Production and Development Plan (APDP), which provides the framework for the vehicle manufacturing industry from 2021 to 2035.
“We have relatively low levels of local content … it is an issue because other markets have more embedded ecosystems, which create a far more solid base for manufacturing. This is also the point of entry that can be established for small black-owned companies in the value chain,” says Davies.
The president of the National Association of Automobile Manufacturers, Andrew Kirby, shares Minister Davies’s sentiment that the new targets are challenging. Kirby is excited by the future of the industry and the certainty that the revised masterplan and amended APDP provide for manufacturers.
Other goals outlined in South African Automotive Masterplan
The new masterplan set out numerous targets, including the doubling of employment by 2035. Currently, the automotive industry employs around 112 000 people. The plan aims to reach 224 000 employees by 2035.
It also aims to push South Africa’s vehicle production volumes up to 1.4 million vehicles per year, accounting for 1% of the global vehicle production. Today, South Africa produces around 600 000 units per annum, accounting for just under 0.6% of the global industry.
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).