Focus on Partnerships

22 Jul 2009

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“The match-making is perhaps the most important service for international visitors – particularly those who have not been active in the South African and African auto industry before”.

Original equipment manufacturers demand that local suppliers have international licensing agreements in place. Therefore, having international links in place is not a choice but a necessity.

Lighting up new markets - SAAW

South Africa is geared up to nearly double vehicle production to 1.2-million by 2020 – and component manufacturers from around the world are welcome to join the local industry for the ride.

Not only welcome – but needed, says Andrew Binning, organizer of the second South African Automotive Week (SAAW). “All the OEMs are working hard at increasing their local content in order to qualify for the support provided by the Automotive Production and Development Program (APDP). That is why SAAW has the official support of both the National Association of Automobile Manufacturers of South Africa (NAAMSA) and the National Association of Component and Allied Manufacturers (NAACAM),” he says.

Hosted in the Indian Ocean motor town of Nelson Mandela Bay (which includes Port Elizabeth and Uitenhage), SAAW 2009 will take place from October 7 to October 10. Support from the Department of Trade and Industry includes assistance with meeting the costs of international delegates attending SAAW, which is a combination of an international components expo, seminars, workshops and match-making. SAAW includes a conference hosted by the Automotive Industry Development Centre (AIDC) with the theme “Navigating the Storm: A roadmap to Vision 2020”

SAAW chairperson Alfred da Costa, who has interests in component manufacturing, says SAAW 2009 will be a mix of a four-day industry expo, conference, match-making and networking opportunities. International interest from manufacturers in China, India, Taiwan and Holland shows that the African market is seen as being a potential growth area by the world’s auto industry, he says. “The match-making is perhaps the most important service for international visitors – particularly those who have not been active in the South African and African auto industry before,” adds Binning. A specialized match-making company has been retained for the first time by an auto industry event in South Africa to ensure that the meetings are productive.

“We understand that there is a shortage of both time and resources, and that companies want value added to an industry event in the form of structured meetings,” says Binning, who also heads up local company Inkanyezi Events. During SAAW, the specialist team will facilitate all the meetings, making sure that the parties are reminded ahead of time, and then following up. Companies from around the world have already confirmed attendance at the trade fair, , says Binning.

NAACAM Executive Director Roger Pitot says the pressure is on OEMs from government through the APDP to support component manufacturing in South Africa, but that it will not be possible to meet an industry target of 70% local content without much higher production volumes. He has urged local component manufacturers to turn this to their advantage by entering into license agreements with foreign suppliers wanting to enter the African and local South African markets.

Over the next two years, the component industry would be characterized by mergers, take-overs and a consolidation of suppliers by original equipment manufacturers (OEMs). SAAW gives both local and international component suppliers the opportunity to meet and create the partnerships needed to prosper.

According to Pitot, South African companies already have the skills, facilities and infrastructure in place – but need technology. “Original equipment manufacturers demand that local suppliers have international licensing agreements in place. Therefore, having international links in place is not a choice but a necessity.” NAACAM’s Annual General Meeting will also take place during SAAW.

There will be tours of local assembly and manufacturing facilities during SAAW. There are around 180 component and allied manufacturers in Nelson Mandela Bay, including three tire plants, General Motors and Volkswagen assembly facilities, and the full spectrum of catalytic converter manufacturers. Component manufacturers and OEMs based in the metro export to all the world’s major markets.

Strong delegations from KwaZulu/Natal and Gauteng will also be at the automotive week to represent the other major auto manufacturing and exporting hubs in South Africa. “SAAW has grown into an international event, with delegates, exhibitors and speakers from around the country and the rest of the world,” says Binning.

Attending the event also gives delegates an opportunity to explore the Eastern Cape Province. There is a number of “big five” malaria free reserves, as well as the Addo Elephant National Park, which offers the best elephant experiences in Africa within an hour’s drive of SAAW. Excursions for delegates are planned for before and after the event. For more information, go to www.saaw.co.za

Supporting automotive investment

South Africa’s automotive sector is supported by the Automotive Production and Development Programme (APDP), which has replaced the Motor Industry Development Programme (MIDP).

The APDP includes four main components:

• Stable and moderate import tariffs from 2012 of 25% for completely built-up vehicles and 20% for components used in vehicle assembly
• A local assembly allowance enabling vehicle manufacturers producing more than 50,000 vehicles a year to import 20% of its components duty free, reducing to 18 per cent over three years
• A production incentive in the form of a tradable duty credit of 55% on the value-added element of a component, measured from the selling price less the raw-material input. This would reduce to 50% over five years. However, an additional 5% would be available for vulnerable sub-sectors
• An automotive investment allowance, which would take the form of a direct grant to the value of 20% of the project over three years. This is to be used to support investment into new plant and machinery.

SA Component Industry

The National Association of Automotive Component and Allied Manufacturers (NAACAM) represents 190 national manufacturing sites, in addition to 12 associate members which provide mainly logistics, IT and financial services.

There is a number of non-affiliated component manufacturers, many of which are affiliated to plastics, stainless steel and other related bodies.

In 2008, the annual sales for NAACAM members totaled around US$6-billion. Sales grew by 6% between 2007 and 2009, according to NAACAM.

The split was - 43% of sales to original equipment manufacturers for vehicle assembly, 8% to vehicle assemblers for their aftermarket, 11% to the independent local aftermarket, and 38% on export sales.

Total turnover for the South African component manufacturing sector was estimated at around US$10-billion in 2008 – up from US$8.6-billion in 2007 and US$7.5-billion in 2006.

The biggest contributors to total 2008 sales were catalytic converters (US$2-billion), non-affiliated suppliers (US$0.8-billion), and tire manufacturers (US$0.7-billion).

NAACAM members invested some US$1.3-billion in capital projects in 2008, while total component industry capital expenditure for 2008 is estimated at US$0.4-billion.

The average local content of the components produced in South Africa ranged between 70% and 80% in 2008.

However, the value of local components used in vehicle assembly averages only around 35% of the total component value – which is where the opportunities lie for investors in the South African component industry.

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