It’s time for South Africa to play leapfrog, says Ford Africa president Neale Hill. The country’s education system is an unqualified mess, causing untold skills problems for the motor industry, among others. But if our sole ambition, as it appears to be, is to not fall too far behind the rest of the world, then we’re doomed to continuous failure.
Instead, he says South Africa needs a concerted effort to catch up and even overtake other countries in skills development. Thabo Shenxane, CEO of the Automotive Industry Development Centre (AIDC) in the Eastern Cape, says current South African engineering qualifications, including university degrees, don’t meet the needs of the modern South African motor industry, particularly as it prepares to eventually shift into the production of electric vehicles (EV).
With input from industry, he says education authorities need to rewrite the entire engineering curriculum.
Then there’s the matter of training centres preparing young people for automotive production and service jobs that soon won’t exist.
Disa Mpande, CEO of Merseta, the government’s manufacturing and engineering education and training authority, recently visited automotive assembly plants in China and was astonished by how far ahead they were of South Africa in EV technology and manufacturing.
And they’re not standing still. “By the time we are ready to teach new technologies, China [and other countries] will have moved to the next level,” she says.
Hill, Shenxane and Mpande were among speakers at an automotive transformation conference in Joburg this week, organised by Naamsa.
The industry is trying hard to increase black and women participation through almost the entire production and retail chain. “Almost”, because multinational motor companies have refused to offer shares in their South African subsidiaries to anyone local, black or white.
Instead, they have opted to pay billions of rand into the Automotive Industry Transformation Fund (AITF), which offers black and women industrialists help in establishing themselves in the motor industry. This has allowed all seven of South Africa’s major vehicle manufacturers to reach BBBEE level 4, the minimum standard for full access to benefits from the automotive production and development programme (APDP), the government-run programme that governs the motor industry. Indeed, nearly all have exceeded the necessary standard.
There’s no point complaining. Everyone, including the government, must try harder
Major multinational components companies, equally insistent on full ownership of their South African operations, are also preparing to pay into the fund. BMW South Africa CEO Peter van Binsbergen says 38 are close to finalising agreements.
These companies are almost exclusively tier 1 suppliers, meaning they deliver completed components to vehicle assembly lines. Tiers 2 and below, comprising mainly local companies making subcomponents, are the main targets for transformation.
Since its launch two years ago, the AITF has sunk more than R1bn into fledgling companies hoping to make it in the motor industry. With the help of the AIDC and automotive companies themselves, support is not just financial, in the form of start-up and asset finance, but also mentoring in the basic arts of business.
Covid killed off some of the smallest newcomers, lacking the financial muscle to survive, but many more are keen to be involved. Without the AITF, AIDC and financial institutions like Old Mutual, which invests in small start-ups, it’s difficult to get under way.
Sinethemba Sakuba, who worked for Mercedes-Benz South Africa for 13 years before winning a seven-year supply contract as part of the East London company’s local outsourcing programme, says that some banks expect businesses to be at least two years old before being granted finance. Sakuba faced this, even with a contract waiting for his company, Electrical Electronics Quality Solutions. As a start-up, “that disqualified us immediately”.
Ipeleng Mabusela, the AITF’s head of strategy and investment, says load-shedding and rising interest rates are scaring off some small black companies from seeking financial support. Many can afford only subprime loans and even then, mostly for short-term working capital rather than long-term growth. In some cases, he says, their best hope of success is also to service industries outside the motor sector.
The challenge of black industrialisation is emphasised by Van Binsbergen, who says fewer than half of the country’s suppliers have achieved BBBEE level 4. In vehicle retail, it’s even worse. Only 20% of dealers have met the target.
To be fair, transformation has been slowed by the impact of Covid. When the APDP was updated in 2021, transformation and other targets were based on pre-pandemic performances.
Annual vehicle production was supposed to rise from 600,000 to about 1.4-million by 2035. That would have created huge new capacity for black newcomers to flourish. Instead, only now are we back to 2019 production levels, meaning four years of growth have been lost. Even without Covid, the 1.4-million target was a long shot. Now, say most analysts, it’s unachievable.
It’s not for want of trying, says Van Binsbergen, but there needs to be a deliberate, united industry effort to accelerate the process. There’s no point complaining. Everyone, including the government, must try harder.
Or, as Naamsa CEO Mikel Mabasa puts it: “Transformation must be front and centre of our thinking.”
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