Motor industry to tap BEE fund to support companies in Covid-19 crisis

The local motor industry could dip into a R6bn black empowerment fund to support local components suppliers and other vulnerable car companies that might otherwise go out of business during the Covid-19 crisis.

The fund, bankrolled by the country’s seven big vehicle manufacturers, is a pillar of the government’s updated automotive production and development programme (APDP) starting in 2021.

The money, which could increase significantly if truck producers and multinational components companies also contribute, is intended to develop new, black-owned suppliers of parts and services.

However, industry officials say the money may be needed to support existing small, vulnerable companies at risk in the next few months.

Renai Moothilal, director of the National Association of Automotive Component and Allied Manufacturers, said: “The fund is an available resource that can be deployed quickly. We should definitely consider using it.”

BMW SA CEO Tim Abbott, who is also president of the National Association of Automobile Manufacturers of SA (Naamsa), said it is “certainly an option”.

The industry is trying to assess the long-term impact of the shutdown — not just on the estimated 120,000 workers directly involved in vehicles and components manufacture but also on the hundreds of thousands of jobs in other sectors that supply the industry.

Moothilal said it is too early to assess the financial cost of the pandemic, beyond saying “it will runs into many billions of rand”.  Repeat shutdowns could cause “Armageddon”, Abbott said.

The entire motor industry will suspend production after Thursday, in line with President Cyril Ramaphosa’s three-week national lockdown to combat Covid-19.

Thin lifeline

Multinational motor companies BMW, Mercedes-Benz and Ford have already announced the suspension of activities at their SA subsidiaries. Now local factories of Toyota, Volkswagen, Nissan and Isuzu have followed suit, affecting their components suppliers and more than a dozen assemblers of trucks and buses.

Some components companies could be offered a thin lifeline if the government accedes to a request by the Retail Motor Industry Organisation to declare retailers of tyres, spare parts and accessories, as well as repair shops, as essential services. At the moment, they will all have to close on Thursday. However,  CEO Jakkie Olivier said they are needed to keep emergency vehicles such as ambulances, fire engines and police cars on the road during the lockdown.

“It is important that ongoing maintenance and repairs are undertaken to these vehicles to keep them in a safe and roadworthy condition during the pandemic,” he said.

Moothilal said some components suppliers could contribute eventually to efforts to manufacture ventilators and other medical equipment urgently required for the fight against Covid-19. The components sector is co-operating with other industries, through Busa, to see what can be done locally, he said.

Motor companies, however, will not be involved. Ford and Nissan are among a number of global motor companies, including Formula 1 racing teams, offering to use their factories to  produce ventilators and face masks. Both said they will not be doing so in SA.

“Production of medical supplies is not feasible in SA plants. You need strong research & development resources to do it successfully. These may be available in US and European plants but not in SA,” Abbott said.

Isuzu SA spokesperson Denise van Huyssteen said it would “entail the re-engineering of our facility which we would be unable to do, given the short notice of the requirement”.