Revving up: Tim Abbott, MD of BMW SA, said the car maker hoped to build 50,000 units at Rosslyn in 2018 and approach capacity from 2019. Picture: FINANCIAL MAIL
Revving up: Tim Abbott, MD of BMW SA, said the car maker hoped to build 50,000 units at Rosslyn in 2018 and approach capacity from 2019. Picture: FINANCIAL MAIL

The government had accepted the refusal by multinational car companies to cede part of their South African subsidiaries to local empowerment partners, in favour of a R3.5bn venture capital fund, BMW SA CEO Tim Abbott said on Friday.

Overseas boardrooms at companies such as BMW, Toyota and Ford still had to officially approve the plan, which would help develop black-owned dealerships and components suppliers, he said, but there was general agreement it was the best way to help local vehicle manufacturers achieve the broad-based black economic empowerment levels required to access future investment incentives.

The government has frequently expressed frustration at the low level of black involvement in the industry.

Department of Trade and Industry (DTI) director-general Lionel October said on Sunday there had been talks with multinationals over the past few months on an alternative for companies that would not implement direct employment equity by transferring 25% ownership to black shareholders.

"In that case we have an equity equivalent. So, for example, they have come up with an equity fund that will facilitate black companies and black industrialists into, for example, their supply chain."

October said the details of how the fund would work were still being discussed.

"Obviously it will not just be about the money — although money is a major thing to provide finance to black industrialists in the auto industry — but it must also facilitate their entry into the supply chain, into the backward and forward parts of the auto value chain," he said.

Without a compromise, the DTI previously said, companies could lose rights to import-duty rebates and investment refunds of up to 30%. Some companies have hinted they might disinvest in that case.

Abbott spoke at the opening of a R73m training academy at BMW SA’s vehicle assembly plant in Rosslyn, Pretoria. The academy will eventually be made available for non-BMW technicians to gain trade qualifications. The emphasis initially is on in-house training.

Rosslyn will end assembly of the 3-Series, which has been built at the plant since 1983, later in February. Production of the X3 sports utility vehicle will begin there in April.

Abbott announced in 2015 that the changeover would require a R6bn investment.

Since then, an extra R156m has increased planned annual production capacity to about 75,000 units. Abbott said BMW hoped to build 50,000 units at Rosslyn in 2018 and approach capacity from 2019.

At first, about 96% of production will be exported. Initial markets will include Germany, the UK, France and Spain. Long-term, it is hoped the new vehicle, designed for off-road conditions as well as tar, will crack markets in sub-Saharan Africa, where conditions often demand versatile vehicles.

In 2016, BMW SA was given the responsibility for distribution and marketing activities across the sub-Saharan region.

The R6bn X3 investment was made possible by incentives offered through the five-year-old Automotive Production and Development Programme, which will expire at the end of 2020. Talks on a successor, intended to run to 2035, are understood to be progressing well, but Abbott said a statement by DTI Deputy Minister Bulelani Magwanishe that the new plan could be ready for presentation to the Cabinet in the next few weeks was premature.