Dti’s not so 99% auto deal

Alec Erwin.   Building an African Auto industry

by John Fraser

When Trade and Industry Minister Rob Davies was a no-show at an auto conference last week, as he had been taken-away to China by his boss Cyril, the dti Director-General Lionel October stood in.

Many in the motoring world had hoped that the dti would use the conference – held in an awful, noisy room next to the Kyalami racetrack – to announce an agreement on a new blueprint for support for the auto industry, to replace the highly-successful support programmes which have driven billions of rand in investment into SA.

October said they are 99% there, and just a few technical issues need to be sorted out.

He said that the auto industry is central to a wider strategy of boosting manufacturing.

“The manufacturing base makes up 13-15% of GDP.  We need it to be at least 20% or above,” he suggested.

“Manufacturing really matters.  It is the real economy that drives anything – agriculture, mining and manufacturing.”

He explained that the big goal of the new auto masterplan is to increase production volumes.

He said SA has reached a key point with annual production of 600 000 vehicles, but the country must expand production a lot more to reach the “critical barrier” of one million vehicles annually.

October said that both government and the industry have reached a consensus “on heading to 60% local content, and value-added localisation.”

This ambitious target is certainly on the government’s agenda, but auto industry insiders suggest that there is not yet the 99% consensus the dti believes it has achieved.

One big challenge in transforming the industry is the refusal of the global auto giants to hand over equity to local BEE partners, and other strategies are being pursued to compensate for this – for instance through an “equity equivalent” empowerment fund, paid for by the auto giants.

October made it clear that he expects better transformation from an industry, which he accused of “lagging behind.”

A big theme of the auto session is the strategy to build a credible auto industry in Africa.

SA former trade and industry minister Alec Erwin is leading the charge on this, and argued passionately that protectionist walls are needed to foster the growth of auto firms in the continent.

He suggested that any moves towards implementing an African Free Trade Area must allow exceptions for effective industrialisation to take place.

“How is Nigeria to start an auto industry if our (South African) cars come in at zero tariffs?  You can’t industrialise behind zero tariffs,” he suggested.

“Everywhere else in the world, you establish Free Trade Areas after you industrialise.”

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