With another year comes the release of the annual, insightful South African Automotive Supplier Industry Benchmark Report, produced for the National Association of Automotive Component and Allied Manufacturers (NAACAM). Based on extensive research and benchmarking activities conducted by specialist consultancy B&M Analysts, the report takes a deep dive into the automotive sector of South Africa, highlighting key benchmark data for local suppliers as well as comparators from both developed and less-developed regions.
The latest report shows assembly growth in the automotive industry, extending beyond our borders to other African countries as well, including Algeria and Morocco. Focusing on South Africa specifically, light vehicle volume has increased by 1.4% in the past year, reaching 582 000 units in 2018, and is projected to hit a total of 642 000 by 2020.
As far as supplier performance goes, South Africa showed some positive results with domestic suppliers increasing their average Rand sales in real terms by 10.7% in the last two years, with a similar growth rate evident in 2017 and 2018 of 5.1% and 5.4% respectively. Renai Moothilal, NAACAM Executive Director, commented that "We are pleased to see that the local suppliers' growth is far stronger than the comparative production volume growth for the SA OEMs."
However, the report also outlines a dip in the number of customer respondents that believe there are opportunities to increase their current buy with SA Tier 1 firms.
From an enhancement and localisation perspective, the report presented a few important points for consideration, encouraging South African-based suppliers to unlock possibilities for growth by further localising their operations.
While some progress has been made in relation to the stock holding of raw materials, the report made it abundantly clear that far more focus is needed on the reduction of this high-cost item for local suppliers as it still considered the largest waste cost. Suppliers should, therefore, continue to implement Supply Chain Management (SCM) best practices to further reduce raw material stock levels. This focus on reducing raw materials should go hand in hand with an increased and proactive drive to localise and reduce import levels.
The localisation drive must be two-fold – firms should identify value-added opportunities that they can undertake themselves, as well as those that can be utilised by local suppliers. This is crucial in support of achieving a short-term local content target of 42% for the SA-based OEMs by 2023, and taking the industry up to the 60% average targeted by the SA Automotive Masterplan to 2035.
Speaking at the launch of the report, Douglas Comrie, B&M Analysts MD, noted that “whilst the South African Automotive Supplier Benchmark Report 2019 confirms that local suppliers are, in many cases, well positioned to grow through increased localisation and/or exports, levels of investment and skills development spend had to be increased rapidly or component manufacturers would find themselves not well placed to unlock the opportunities that the new policy framework gave them”
The South African Automotive Supplier Industry Benchmark Report is jointly delivered with B&M Analysts as part of
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