This month, we draw attention to the welcome developments in support of the growth of the automotive sector in South Africa. The International Finance Corporation (IFC) has signed a partnership agreement with the National Association of Automotive Component and Allied Manufacturers (Naacam), the industry association for automotive component manufacturers, to develop an automotive database to match the procurement needs of Original Equipment Manufacturers (OEMs) and Tier 1 component manufacturers to sub-tier local suppliers in South Africa. 

Through the partnership, IFC will provide support to Naacam to develop a matchmaking platform, informed by inventories and databases of components that may be manufactured locally, that will enable OEMs and Tier 1s to be matched to competencies of Tier 2 and Tier 3 local suppliers. This will in turn allow sub-tier suppliers to gain access to valuable information on local supplier development opportunities and cultivate bankable projects that will help unlock private investment to scale local production.

Component manufacturers

As part of efforts to deepen local supply chains and drive economic transformation, the South African Automotive Masterplan (SAAM) aims to increase the market share of local component manufacturers in the automotive sector in South Africa by about 21 percent, up from the current 39 percent to reach 60 percent by 2035. OEMs and Tier 1s will be encouraged to meet localisation targets through the SAAM’s incentives framework. 

“Naacam members are heeding the call to deepen localisation. This not only delivers much needed employment and other economic benefits, but also reduces suppliers’ risks as they become less reliant on imported components and contributes to greater stability in local OEM value chains,” says Renai Moothilal, Naacam Executive Director. While there have been policy advancements towards a higher localisation rate, a practical barrier to unlocking this is often inefficient flows of information between buyers and suppliers in the value chain. Often emerging suppliers and new entrants are unable to identify localisation opportunities in their area of engineering capability. At the same time, it is not easy for OEMs and Tier 1s to collate up-to-date information on new and existing suppliers in terms of capabilities and accreditations. 

NAACAM NEC members and IFC-International Finance Corporation at the “Driving Localisation” partnership signing. Seated Renai Moothilal, Executive Director, NAACAM (left); and Paul Bwanika Mukasa, Senior Investment Officer, IFC-International Finance Corporation

“Through the agreement, South African local component manufacturers will be able to access peer learning opportunities with frontier countries to support capacity development. The agreement will also help address one of the key challenges encountered by OEMs and Tier 1s in identifying potential suppliers at a sub-tier level.”

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