27 March 2023

Small, medium, and micro enterprises and emerging entrepreneurs are essential in strengthening South Africa’s ever-changing automotive industry, bringing with them fresh, innovative approaches and new employment opportunities, says the Tshwane Automotive Special Economic Zone’s CEO, Dr Bheki Zulu.

In a rapidly changing economic environment black entrepreneurs have a vital role to play in South Africa’s automotive industry; they are essential to the growing and strengthening the future of the industry.

The global automotive industry is evolving, with disruptive technology driving it into a new era: backed by the demand for a green and sustainable environment, it will not be too long before electric vehicles and self-driving cars become mainstream. New technologies, materials and even ways of working lie on the horizon.

This information is crucial to the South African automotive industry, which is aiming to improve on its global status as a second tier producer ranked 26th for passenger vehicle production and 15th for light commercial production, as noted in the South African Automotive Master Plan which is aimed at guiding the development of the country’s automotive value chain through to 2035.

While the industry is the most important manufacturing sector in the country, contributing 4.3% to South Africa’s GDP in 2021, with the export of vehicles and automotive components reaching a record amount of R207.5 billion – equating to 12.5% of South Africa’s total exports, it needs to do much more to help grow the country’s economy. The manufacturing sector has been identified as a key economic driver with the ability to create jobs, grow locally made products, and encourage investment opportunities.

Industry growth strategies are focused on becoming integrated into the global automotive environment on the back of inculcating the culture of innovation among small, medium and micro enterprises (SMMEs) in the industry. The objective under the South African Automotive Master Plan is to produce 1% of global vehicle production, or 1.4 million vehicles a year by 2035.

A catalyst for growth

Critical to the plan is opening up the industry and embracing more, diverse, and innovative role players, particularly black entrepreneurs. An inclusive automotive industry can become the catalyst for economic growth and job creation.

The South African Automotive Master Plan has identified six core objectives:

  • Grow local vehicle production to 1% of global output;
  • Increase local content to up to 60%;
  • Double employment in the automotive value chain to 240 000;
  • Improve competitiveness levels;
  • Transform the industry through the employment of black South Africans, upskilling of black employees, empowering dealerships and repair facilities, and increasing the contribution of black-owned automotive component manufacturers to 25%; and
  • Deepen value addition within automotive value chains via linkages. 

These objectives drive the transformation work of the Tshwane Automotive Special Economic Zone (TASEZ). Based in Silverton in the City of Tshwane, TASEZ was established as an automotive hub which offers its tenants a prime location close to an established automotive industry, links to regional and international markets, customised solutions and support services, and a number of incentive packages.

As relative newcomer to the Special Economic Zone (SEZ) space, TASEZ is determined to deliver on its mandate to be a catalyst for employment, transformation, socio-economic development, and industry growth. The entity, the first automotive SEZ, was officially being launched in November 2019.

Special Economic Zones are instruments set up to support long-term industrial and economic development, with the aim of directly impacting employment and economic growth and attracting foreign direct investment. With this in mind, one of TASEZ’s core values is to ensure greater inclusion of SMMEs within the automotive value chain, deepening the value addition to the industry.

TASEZ has a strong focus on skills development, job creation and growing human capital. During the 2021/2022 financial year, 3 348 construction jobs were created, with 67% of construction employees
coming from neighbouring communities in Mamelodi, Nellmapius and Silverton. Within the zone itself, 603 operational jobs have been created by investors, with an additional 1 288 jobs planned for
the next financial year.

SMMEs are key

It is clear that the automotive industry needs to invest in SMME and new venture creation and development. SMMEs are generally driven by dynamic, young, and technologically savvy people who are action-driven, energetic and prepared to take on any challenges in front of them. They are particularly well placed to implement innovative solutions for the automotive industry; capable of developing new products and services, such as innovative software solutions; finding ways of streamlining production processes, through finding new automation options; or deliver unique designs for future products.

As President Cyril Ramaphosa noted in his 2023 State of the Nation speech: “A growing economy must also be an increasingly inclusive economy. Growth and the creation of jobs in our economy will be driven by small and medium sized enterprises, cooperatives, and informal businesses.”

Currently SMMEs represent more than 98% of businesses in South Africa, employing between 50% to  60%  of the country’s workforce across all sectors.

Despite their drive to succeed, entrepreneurs and their SMMEs are among the most vulnerable sector in the country. They face a number of challenges including limited or no access to finance, markets or technology, a lack of space or infrastructure, limited access to business support, poor skills, onerous labour laws, and a constricting economic climate.

TASEZ addresses SMME development by requesting that main construction contractors spend a
minimum of 45% procurement on SMME packages. For the 2021/2022 financial year, main contractors achieved a 44% SMME procurement spend, well above the national target of 30%. This is in keeping with the requirements of the newly promulgated Gauteng Township Economic Development Act (2 of 2022) which requires provincial government and municipalities to spend 40% of its procurement budgets on township-based enterprises and encourages enterprises to manufacture goods locally to create jobs.

Embracing change

As noted, because new innovative technologies – including artificial intelligence, big data, cloud computing, mobile connectivity, robotics and the internet of things – are driving the future of the industry, investments in digital infrastructure and financial systems should be prioritised. Innovation is regarded as a crucial determinant of growth and development in South Africa, and, as set out in South Africa’s National Development Plan SMMEs have been earmarked as instruments for the achievement of the socio-economic goals and innovation.

The arrival of the Fourth Industrial Revolution, of digitalisation, has been disruptive to the global economic environment and indeed, the Covid-19 pandemic has sped up this process, creating a “new normal”, changing how business is done. Proactive actions to embrace this future and transform the industry include: setting up transformative and strategic partnerships or joint ventures; offering training programmes to up-skill or re-skill entrepreneurs; creating access to funds through loans, grants and incentives; providing mentoring and foster collaborative relationships, and investing in research and development in digitalisation and innovation.

As we try to predict the future, the conversation inevitably shifts towards the most critical enabler of all, and an imperative for SMMEs: preparing leaders of tomorrow’s talented and digitised world. Traditional skills may no longer be sufficient anymore to weather an increasingly volatile, uncertain, complex, and ambiguous post pandemic business era.

The automotive industry must take cognisance of this. This is why TASEZ has launched an award, the Automotive SMME Innovation Award, aimed at acknowledging and rewarding innovators, researchers, and entrepreneurs for their work on fresh technologies that will improve service delivery, increase competitiveness, and enhance the lives of ordinary citizens.

The “new normal” is providing the industry with the impetus to adapt and become more inclusive. Business can now spend time assessing the way they work and amend their strategies to support black entrepreneurs.