Auto makers win a major battle against BEE

Trade and Industry Minister Rob Davies

If you ever wondered about the immense power of the auto industry lobby, you need only look at the automotive masterplan, which was unveiled on Friday by Trade and Industry Minister Rob Davies.

This charts a path to 2035, and gives an assurance that the big auto companies will continue to be the most pampered of international investors in SA, with a range of incentives and sweeteners.

One improvement on the existing support programme is that they must use more local content, rising to a 60% share in 2035 from just under 40% at present.

This is important not just in trade terms, but because the robot-infested assembly plants have a far lower employment profile than the more labour-intensive component companies.

One in the bag for Rob Davies.

On the other hand, the auto giants have been able to bully their way out of a major BEE requirement which applies to almost every other investor in SA (Caterpillar also managed to crawl out of it).

This is a requirement to hand over a certain minimum stake in your business to BEE partners.

Instead, there will be ‘equity equivalence’, as they put it. The auto makers will do other stuff to uplift black South Africans, and they have already announced a R3.5bn fund for this very purpose.

Davies was anxious to point out the importance of his incentive regime to support the auto industry.

He gave the example of Australia, which phased out its own auto incentives, and where the last car plant has closed. Damm.

However, this begs a multi-billion rand question…..

Has the collapse of auto assembly crippled the Australian economy? I don’t think so. And presumably neither do they, or the state support would still be in place.

Is it wise for our government to put the largest chunk of its (shrinking) investment incentive support armoury into the very labour-unintensive auto sector?

The counter-argument is that by having a world-class auto industry, SA can attract other investment, can help arrest the decline in manufacturing, can build and preserve skills.

It’s a tough one.

Like this article? Subscribe for free to ZA Confidential to receive our newsletters: Click here