In 1995, the new government drew up the Motor Industry Development Programme to put the automotive industry on the map; the IDC has been alongside its development all the way.
In the last 20 years, the automotive industry has become a major segment of the country's economy, and the IDC has played a leading role in positioning it as a global player.
The sector contributes 6% to the gross domestic product and employs 7% of all manufacturing workers, making it a major source of jobs. Since the dawn of democracy, it has contributed 22% of manufactured exports and 10% of manufacturing fixed investment.
The government put in place policies that ensure the automotive industry could become a major player in the global market, and the IDC is aligning itself with that vision. The MIDP was introduced to improve the local industry's competitiveness and affordability of locally built cars, and to encourage export-led growth of the industry, to stabilise employment, and to create a better industry foreign exchange balance.
The programme was successful in many areas, especially by boosting export performance. This was achieved in part through rationalisation of the number of locally produced models. Then, in 2013, the Department of Trade and Industry introduced the Automotive Production Development Programme (APDP) – which replaced the MIDP – to increase the volume of cars manufactured in South Africa to 1.2 million annually by 2020, as well as to diversify the automotive components chain.
The National Association of Automobile Manufacturers has said production, particularly that of light motor vehicles, will rise from 2014 onwards because of the APDP. According to the association, average industry employment figures rose by 441 jobs in the third quarter of 2013, bringing the total to 30 344 positions in the sector. New car sales also rose to 125 189 units, more than 6.4% higher than in the corresponding quarter in 2012.
Europe remains the local industry's largest export market, despite the effects the recession is having on the euro zone. In 2012, 66 929 vehicles were sold to Europe, 6 000 more than were sold in Africa. However, the recession resulted in a 12.7% drop to 58 403 vehicles.
Components and assembly
Many of the major multinational manufacturers use South Africa to source components and assemble vehicles for both the local and international markets.
The sector is largely located in two provinces, the Eastern Cape, which is home to Daimler-Chrysler and Volkswagen production plants, and Gauteng, where Mercedes-Benz and BMW make their vehicles. Component manufacturers, such as Arvin Exhaust, Bloxwitch, Corning and Senior Flexonics, have also established production bases throughout the country.
South Africa's low costs for high quality production and its access to lucrative markets – because of trade agreements with the European Union and the Southern African Development Community – make the country an ideal place for motor vehicle companies to set up home.
Since the government introduced the Motor Industry Development Programme (MIDP) in 1995, the industry has grown twofold, and the IDC has played a significant part in that growth. Not only was it a contributor to the formulation of the MIDP, but it has also approved about R5-billion (R7.8-billion in 2013 prices) of funding, 80% of which was allocated to smaller car manufacturers, original equipment manufacturers (OEMs) and other vehicles such as buses and trucks. This funding supported close to 16 000 jobs.
The IDC supported the industry through the global financial crisis and the countrywide automotive industry strike in 2013, with 25% of its funding for companies affected by the crisis aimed at this sector. One case in particular involves SOS Tool and Die, an OEM in the town of Brits in North West. The global recession had put a dent in the company's operations, prompting the IDC to approve R2.5-million for machinery and working capital in 2011. This alleviated the financial pressure on the group.
Not content to support car makers only, the corporation has also been involved in the development of public transport. In 2012, it entered into an agreement with a Chinese company, Beijing Automobile Works, to open a minibus taxi plant in Springs, Gauteng. The IDC contributed equity of R22.9-million and debt facilities worth R98.6-million, giving the corporation a 24.5% stake in the factory.