Goals for car industry empowerment will be incremental, says Davies
BUSINESS LIVE / 19 FEBRUARY 2018 - 05.51 / DAVID FURLONGER
Long-term motor industry policy in SA must set incremental, "achievable" gains for black participation and ownership, says Trade and Industry Minister Rob Davies.
Speaking in Port Elizabeth, where he attended the official launch of Isuzu SA as an independent vehicle manufacturer, Davies said future policy must build on existing gains and not set unrealistic targets.
Minister of Trade and Industry Rob Davies. Picture: Russell Roberts
That’s why, he said, the government was sympathetic to vehicle manufacturers’ offer of a R3.5bn fund to pay for development of black-owned automotive dealerships and components suppliers.
The proposal is a counter-offer to the government’s earlier request for multinational motor companies to cede part of their South African subsidiaries to local black partners.
The Automotive Production and Development Programme (APDP), which has shaped the motor industry since 2013, is due to expire at the end of 2020 and Davies said discussions on a successor, which is intended to run to 2035, were advanced.
While there would be a high degree of continuity, "I think the new programme will have some surprises", he said. "Not everyone will be happy with every dot and comma."
Given that the programme had to meet not only the government’s needs but also those of vehicle manufacturers, components suppliers and unions, compromise was inevitable.
Much of the emphasis would be on creating black-owned suppliers. "The cost of job creation in that sector is a quarter of that in vehicle manufacture."
Long term, the goal was to increase average local content in SA-produced cars and light commercial vehicles from below 40%, where it sits now, to at least 60%. "But we will set the targets in a way that is achievable and doable. We will progressively build on what we already have."
Isuzu SA CEO Michael Sacke said the company was ready to contribute to the R3.5bn industry fund, though "we haven’t directly addressed the issue yet. Our main concern has been getting up and running."
Japanese parent company Isuzu has bought the Struandale, Port Elizabeth, vehicle assembly plant and other South African infrastructure of General Motors SA (GMSA), which disinvested at the end of 2017.
GMSA’s product range had included the Isuzu KB bakkie range, as well as larger trucks and buses.
Sacke said operating independently would allow Isuzu to focus on its own needs. KB sales had already grown 15% in 2017, when about 18,000 vehicles were produced. The target for 2018 was 22,500. Struandale has annual capacity for 75,000 vehicles on 24-hour production but on its current one-shift pattern can build 25,000.
One of the big targets was to increase sales into Africa, where bakkie exports are a fraction of those of companies like Toyota and Ford. However, Sacke said: "Their Africa exports earn APDP duty credits they need to import cars and other vehicles in their overall product range. We don’t import so the need to export isn’t as strong."
That will change later in 2018, when Isuzu will import the MU-X, an upmarket version of the KB, to compete with the Toyota Fortuner and Ford Everest. Sacke said local assembly could follow if sales justify.
He said Isuzu exports’ share of local KB production, currently sitting at 15%, would eventually rise to 50%.
Isuzu Japan president Masanori Katayama confirmed that the availability of a "springboard" into Africa was one of the main reasons his company had bought GMSA’s operations.
"This is the first commercial and light-commercial vehicle manufacturing operation outside Japan in which we have acquired 100% ownership," he said. "We are represented in 30 countries and operate 47 manufacturing plants with joint-venture partners.
"Our SA decision demonstrates the confidence we have in this market and is indicative of our longer-term view that SA will serve as an important base for our future growth on the African continent."
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