South African Business 2016 edition

OVERVIEW Automotive

OVERVIEW Automotive components Incubation parks are promoting start-ups in the components sector. Several provinces are making an effort to support existing businesses and promote new ventures in the automotive-components sector. The provincial government of North West and the Automotive Industry Development Cluster (AIDC) combined to help wireharness manufacturer Pasdec Automotive Technologies open a new assembly line in Brits. Other big companies in the North West are Bosch, Bridgestone and Giflo Engineering. In Gauteng, the AIDC teamed up with government agencies and Ford and Nissan to establish incubation parks to encourage more black businesses to enter the sector. Automotive parts made in South Africa are exported to more than 70 countries including Japan, Australia, the UK, the US, Algeria, Zimbabwe and Nigeria. The large number of vehicle models produced is a complicating factor for the components sector: low volumes often mean high prices. Two Port Elizabeth companies were highlighted. Schaeffler SA exports much of its production to its international parent so that it can achieve higher volumes. Shatterprufe supplies the majority of windscreens to the South African marketbut there are 12 model ranges to serve. The success of South African catalytic converters has been spectacular. From a start-up industry in the mid-1990s, the sector now supplies 14% of the world market and is worth at least R18-billion. Economic transformation The Automotive Incubation Centre, launched on 25 March 2015 at Nissan in the Tshwane suburb of Rosslyn, is expected to radically transform the economy. The centre, the second in South Africa, is aimed at establishing and nurturing small- and medium-sized enterprises that can supply components to Nissan South Africa’s production line, while they receive training on meeting international standards for automotive parts and components. Only 35% of the components and parts used to make vehicles in South Africa are produced locally; the balance is imported. Gauteng’s car makers spend nearly R8- billion a year on imports for automotive parts, components and accessories. The first Automotive Incubation Centre was launched in 2011 at Ford Motor Company of Southern Africa’s manufacturing plant in Silverton, also in Tshwane. The incubation centre was established by the Automotive Industry Development Centre (AIDC), which is a subsidiary of the Gauteng Growth and Development Agency (GGDA), which itself is a unit of the Gauteng department of economic development. SOUTH AFRICAN BUSINESS 2016 94

Food and beverages The sector employs nearly a quarter-of-a-million people. OVERVIEW The food and beverages sector is one of the most important components of South Africa’s manufacturing sector. Beverages account for just over 4% of all manufacturing sales while food is responsible for 13.5%. Within the sector, beverages accounts for 24% of sales. According to the FoodBev SETA, the sector is responsible for 17% of gross value added in the manufacturing sector and employs 230 000 people. South Africa’s production of food and beverages has been rising steadily since 1990. The Centre of Excellence in Advanced Manufacturing at North West University strongly believes that extrusion technology (in which it is an expert) holds the answer to the establishment of small to medium-sized processing plants on farms or in rural areas. One quarter of the 37% of national GDP that is generated by agri-industries derives from agri-processing. Gauteng, the Western Cape and KwaZulu-Natal are the leading provinces with respect to food and beverages manufacturing. About half of the companies operating in the sector are in Gauteng. Capespan and DoleSA are among the biggest exporters of fruit from the Cape. In KwaZulu-Natal, the food subsector makes up the biggest part of the manufacturing sector (84%). Tongaat Hulett makes treacles, caramels and related products for the food, baking and confectionary trade. Granor Passi processes 220 000 tons of fruit, one of Limpopo’s biggest food and beverages enterprises. Limpopo is also home to giant producer, Westfalia, which runs three large processing plants. Enterprise Foods has an emulsions and canning plant in Polokwane. The central and eastern parts of Limpopo, especially around Tzaneen, are well-suited to tea cultivation, and demand for rooibos tea is on the increase. The marula fruit and the mopani worm are synonymous with Limpopo. Frost & Sullivan values the South African retail chocolate market at R5-billion with an expected growth rate of 10% per year for the next five years. Cadbury, Nestlé and Beacon account for 85% of sales. South Africa has mature fast-food and family-restaurant franchise sectors, ranging from indigenous brand Spur and Nandos to international giants such as KFC, McDonald’s and now Burger King. Nando’s, the Portuguese-chicken chain, has done very well internationally, and is a phenomenon in Britain. Wimpy is the second largest-franchise operation in SA (after KFC). South Africa is a beneficiary of the US African Growth and Opportunity Act (AGOA) and risks losing duty-free access for exports to the U.S. worth as much as .7 billion a year. The U.S. is reviewing South Africa’s status as a full beneficiary. AGOA, which eliminates import levies on more than 7000 products ranging from textiles to manufactured items, was renewed in June for another 10 years, benefiting 39 African nations. Now American chicken and cattle farmers want South Africa’s government to remove trade restrictions imposed to protect the local industry from a flood of cheaper imports. While Trade and Industry Minister Rob Davies said on Sept. 29 that South Africa had done all it can to retain access to AGOA, the U.S. government cites major unresolved issues. “South Africa needs to take concrete steps towards eliminating barriers to U.S. trade and investment, a key criterion to be eligible for AGOA trade benefits,” Trevor Kincaid, a spokesman for the office of the U.S. Trade Representative in Washington, said in an e-mailed response to questions posed by The Nation. “Ultimately, South Africa’s AGOA eligibility is in South Africa’s hands.” 95 SOUTH AFRICAN BUSINESS 2016