Despite the coronavirus pandemic which affected the SA automotive industry sector immensely, the sector is relatively healthy and robust and employs more than 100,000 people.

In 2020 the sector contributed 4.9% to the country's GDP, of which 2.8% of the total is manufacturing and 2.1% retail. But this is down from 6.4% in 2019 and it’s also beleaguered by chronic nontransformation. Are things about to change? Listen here: 

In 2020 the Automotive Industry Transformation Fund (AITF) was established. It was the brainchild of at least seven multinational automotive manufacturers in SA  namely BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, Volkswagen as a collective Equity Equivalent Investment Programme (EEIP) as defined in the BBBEE codes between the founding OEMs to facilitate transformation across the sector’s value chain.

The fund is part of a strategy which it’s hoped will yield access to developmental funding, market and access to capacity development for qualifying black-owned entities, as explained by its CEO, Jabulani Selumane, who spoke to Motor News recently.

Asked why this is exclusive to the above-mentioned brands, Selumane explains that the rest such as Stellantis, Volvo, Mitsubishi, Porsche and others aren’t registered as multinationals in SA, but rather local businesses licensed to distribute brand cars in this market. He also says that close on 31 tier-one multinationals are expected to join the AITF by 2023.

Selumane  has been involved with the concept development since 2015 when the sector was first confronted with legislative changes, and when the government pressed on with finding meaningful yet practical solutions for OEMs to participate in the transformation agenda without diluting ownership.

Ultimately, the solution had to take cognisance of the fact that none of the local OEMs is owned by SA citizens but are the properties of foreign entities or family-owned businesses such as the Chung, Quandt, Toyoda, Porsche and Piëch dynasties that run Hyundai, BMW, Toyota, Porsche and Volkswagen respectively.

In this case, the equity-led BBBEE targets in conjunction with the SA department of trade & industry (DTI) are out of the question in their conventional form. This is why Selumane describes the Chinese system as creating joint ventures rather than giving away equity, which they have adopted for the fund.

“Equity in such cases can be reflected down the value chain by bringing in new black-owned suppliers and the fund assisting to set up new businesses with a proven viability, or existing companies with the aim of ramping up production or diversifying within the industry,” he adds.   

Another positive perk that's unlike other sectors in SA with similar transformation goals is that beneficiaries of the fund don’t only access money to become operational, but also a market to supply the same OEMs who set up the funding model. The fund has a cash component of R2.28bn provided and dispersed by OEMs to create black-owned supplier companies and the monies will be replenished every year until 2030, according to Selumane.

But how does the ordinary man or woman access the fund? According to Selumane it’s the founding OEMs who forward the deserving establishments towards the AITF, which then gets the wheels rolling to identify specific needs and opportunities. He encourages entrepreneurs with an interest in the local automotive industry to approach the listed OEMs.

So far the fund has spent about R120m in more than 13 approved transactions with a 51% black ownership across the value chain, from component manufacturing to dealerships of which eight are women founded, including a 100% female-owned auto body business in KwaZulu-Natal.

The fund has a Women Economic Assembly (Wecona) aspect to give more female-owned entities better opportunities to participate in the automotive sector.

Some black-owned companies which have benefited from the AITF include:

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