I’m pretty sure you must have heard one or more of the following slogans/ expressions such as – “Buy Local” or “Shop South African”. Or more recently, during COVID-19 in RSA, perhaps you have heard the term “Economic Patriotism” to reflect the desire of government that South Africans should buy local at this extremely tense economic time. Government for its part is in many ways leading such efforts by, for some time already, compelling its own state organs (by way of legislation) to not only support local businesses but also and most especially Black-owned ones. This is evidence of the need to proactively drive transformation of the economy and society in general. While these ideas most often refer to small businesses and the associated consumer or discretionary purchases, and reflect the desire to support local entrepreneurs and help grow them and their employees, they also find expression in the Autos Industry.
Within the automotive manufacturing industry this concept of localisation is captured by measuring the amount of local content in vehicles produced in SA and is usually shown as a percentage of the total content of a vehicle. This includes all the value of materials, components, and local manufacturing costs going into a locally produced vehicle. Local content of around 43% in Fig. 1. below reflects the developing status.
Fig. 1. Local Content Developments
B&M Analysts have been contributing for some time now in efforts to increase localisation. This has come in many different forms and ways. On a regular basis through its South African Automotive Supplier Industry Benchmark report, which annually consolidates individual firm-level benchmark data, B&M Analysts have been reporting that localisation opportunities should increasingly become evident for SA based manufacturing suppliers. Categorically, local OEM automakers, as customers of these suppliers are looking to increase their total spend in future wherever feasible and possible. Such actions are however not without its challenges as indicated by the 3 Notes in Fig. 1.
These aspirations have most recently culminated in the SA Automotive Masterplan (SAAM) which continues to incentivise projects which lead to purchases of more of the same, expanding the range or newly developed products / technologies. Government continues to use these incentives as a key industrial development policy tool in order to build a sustainable economy in a globalised world. Through this approach, the SA Auto industry is scoping its way to a more significant position in the global automotive space.
The choices and developments which underpin these localisation efforts are moreover not without their risks. Many other countries view their situation in similar ways. Nonetheless, SA needs to find ways to drive and succeed in localisation efforts, across automotive and other industries, in order to promote greater economic prosperity and sustainable growth.