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Contents Key facts and numbers .............................................................................................................................1 Scope of report .........................................................................................................................................2 Vision and objectives ................................................................................................................................2 Background and institutional form.............................................................................................................2 Letter from the Chairman ..........................................................................................................................3 Letter from the Chief Facilitator ................................................................................................................5 Letter from the Deputy Mayor ...................................................................................................................6 Profile of the local automotive sector ........................................................................................................7 Cluster conceptual model .........................................................................................................................9 Executive function .................................................................................................................................. 10 Programme activities .............................................................................................................................. 12 Highlights from 2009 - 2011.................................................................................................................... 20 Annual Financial Statements for the year ended 31 December 2011 ..................................................... 24 Directors’ report ...................................................................................................................................... 25 Statement of financial position ................................................................................................................ 26 Statement of comprehensive income ...................................................................................................... 26 Member listing ........................................................................................................................................ 27 Notes ...................................................................................................................................................... 34 Contact Information ................................................................................................................................ 36


Key facts and numbers •

Membership represents 90% of automotive manufacturing activity in KwaZulu-Natal

Over 17,000 people employed by member firms

R 2.3m of expenditure in 2011

Approximately 50% of funding is leveraged from the private sector and sources other than the eThekwini Municipality

Established in 2002 and 10 years in existence

10 successive years of unqualified financial audits

40 member firms

1,234 people participated in workshop related activities between 2009 and 2011

89.8% average assessment rating for workshop related activities

Recognised as an exemplar of clustering by various national and international government, nongovernment and industry bodies

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Scope of report The DAC is a Public-Private Partnership (PPP) between the eThekwini Municipality and the automotive industry in KwaZulu-Natal. The annual report represents a review of the activities of the Section 21 Company for the year ending 31 December 2011.

Vision and objectives The DAC’s overarching long term vision for the regional industry is to double its size by 2020. This objective is seen as being of significance to both public and private sector interests. Indicator

2007 (baseline)

2020 (objective)

R 12 bn

R 30 bn

35,435

59,427

Manufacturing Value Added (MVA) Employment

Five strategic focus areas have been identified as being core to attaining the growth aspirations of the KZN automotive industry. Successive three-year ‘business plans’ of the DAC are therefore developed to support progress in each of these five areas: •

Growth through market linkages & investment

Localisation & supplier competitiveness

Skills development & skills retention

Infrastructure reliability and competitiveness

Transformation

Background and institutional form The DAC was established in January 2002 with the primary purpose of developing the competitiveness of the KwaZulu-Natal automotive industry. DAC members constitute over 90% of all automotive manufacturing activity in KwaZulu-Natal. The operating model entails industry contributing technical and management expertise to focused Technical Steering Committees (TSCs), with these TSCs then in turn reporting into an Executive Committee comprising both industry and local government representatives. The success of the DAC as a PPP was recognised at the First National Bank (FNB) KZN Top Business Portfolio Awards ceremony held in May 2010. At this function the partnership between the DAC and eThekwini Municipality Economic Development Unit received the ‘partnership award’ for 2010. 2


Letter from the Chairman On behalf of the Executive Committee of the DAC I am pleased to deliver the DAC’s 2011 Annual Report. This report provides a detailed summary of the activities of the PPP between the eThekwini Municipality and the automotive manufacturing sector in KwaZulu-Natal aimed at supporting the competitiveness

and

growth

of

the

local

automotive

manufacturing sector. 2011 proved to be a challenging year for the automotive industry in KwaZulu-Natal. While the Department of Trade and Industry (dti) provided greater clarity with regards to the industry’s policy environment post 2012 and many manufacturers benefitted from a moderate recovery in the local market, both of these factors overshadowed economic crisis in Europe and how it might affect the local industry. The complex and fluid external environment within which members operate requires that the DAC constantly challenge itself in respect of its ability to respond to new challenges and offer even more value. The DAC has accordingly heightened the importance of activities related to market linkages, localisation and skills development. During 2011 the DAC facilitated opportunities for members to gain access to important information regarding OEM localisation projects and new model introductions. Supplier excellence and export promotion activities were also heightened, with these activities including a highly beneficial study tour to the Turkish automotive industry in November. Lastly, information and support was also provided in relation to how the Automotive Production Development Programme (APDP) will influence the industry and what firm-level strategy changes should be made to better position firms to benefit from the APDP. The DAC collaborated with a variety of different organisations during the year under review. Notably, the cooperative Tier 1 supplier development work that took place since 2008 yielded an opportunity to partner with the Netherlands Trust Fund II (NTF II) in relation to the implementation of a Tier 2 supplier competitiveness project during the second part of the year. This project was successful and there is an opportunity for this support to now be deepened in 2012. Skills development remains an industry-wide challenge that the DAC continues to engage with on a number of fronts. The HR excellence meetings continue to be dynamic forums for sharing firm-level practices that better position firms in relation to skills challenges. Further to this the DAC has been

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successful in establishing formal skills support structures in the fields of engineering and management. I am also pleased to report that the HIV and AIDS programme continues to be a flagship initiative, with over 40% of member firms implementing the highly structured HIV and AIDs workplace programme that is being offered in partnership with the South African Business Coalition on HIV and AIDS (SABCOHA). The DAC maintained its focus on infrastructure and related issues and one of the most exciting developments in this field is the closer relationship with the National Cleaner Production Centre (NCPC), which is expected to yield free energy audits and related energy efficiency support for firms. Transformation has remained a priority and while members were provided with best practice support in the field of Broad-Based Black Economic Empowerment (B-BBEE), extensive support was also provided to emerging Black owned manufacturing small and medium sized enterprises (SMEs). From a financial perspective, I am pleased to report that the cluster is in a healthy financial position. Income for 2011 totalled R2.4m while expenses totalled R2.3m. The DAC remains compliant with all relevant legal and statutory requirements and continues to receive unqualified, clean audits from PKF, the appointed auditing firm. Overall, despite the challenging economic environment in 2011, the DAC succeeded in making positive strategic and operational strides. This places the DAC in a solid position to deepen its support to the local automotive manufacturing industry in 2012.

Zamokwakhe Daniel Xaba Chairman

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Letter from the Chief Facilitator 2011 proved to be a year of mixed fortunes for the DAC facilitation team and DAC member firms alike. The DAC wrestled with moderate levels of funding uncertainty over this period while at the same time needing to implement initiatives that would provide effective assistance to member firms buffeted by globalisation pressures, a slow recovery from a global recession and prospects of a possible second global recession. I am however pleased to report that the DAC has been largely successful in navigating these tricky waters. This would not have been possible without the strategic direction and guidance of the Executive Committee and I would accordingly like to take this opportunity to thank the Executive Committee for its commitment and support. The DAC’s funding of R2.4m for 2011 was employed as effectively as possible and, where possible, used to leverage outcomes disproportional to the limited amount of funding available. In this regard I am also pleased to report that a number of new collaborative partnerships were established in 2011, adding to those already in place. Feedback from members suggests that many of the operational changes made by the facilitation team during the year were successful and effective. The move to quarterly outputs by the various programmes has yielded higher participation levels while average assessment ratings provided by participants have increased for the second year in a row. The heightened importance placed on business linkages, localisation and skills development lends itself to a narrow set of interventions that will deliver high levels of value to participating firms while also securing broad participating from members. In response to this challenge the DAC will need to expand its collaborative partnerships and pursue opportunities for securing additional funding. There can be no doubting that the automotive industry is vital to the economy of KwaZulu-Natal and as such the importance of the work that the DAC does is disproportionate to its available resources. This poses a major challenge, but one which the DAC is well positioned to tackle given its strong track record of corporate governance and service delivery.

Douglas Comrie Chief Facilitator 5


Letter from the Deputy Mayor The economic development and investment promotion unit of the eThekwini municipality, in partnership with the automotive industry in Durban, established the Durban Automotive Cluster (DAC), a section 21 institution, to embark on a wide range of interventions to assist the local automotive manufacturing industry. Since its establishment in 2002, the DAC has achieved considerable

successes

and

these

should

be

duly

acknowledged. The DAC has earned credibility and trust as an effective and highly efficient platform for dealing with specific challenges facing the automotive industry and hence the DAC continues to strengthen its membership base. The DAC’s interventions leverage synergies between firms in a manner that supports value chain upgrading and hence employment retention and creation within the sector. Moreover, it has been successful in forging strategic international and local partnerships, to increase its resource base, and thereby leverage higher value outputs. The DAC consequently continues to perform exceptionally well as a partnership between industry and Government. Government appreciates the importance of supporting this sector and recognises its importance as a key contributor to the local and national GDP and employment. ED & IPU will consequently continue its support to this sector in areas such as providing infrastructure for expansion, facilitate platforms for new markets, encourage specialised skills development, capacity building for the institution and its member firms and more importantly to ensure that we implement projects to support sustainable SME development within the industry. Moving forward the DAC has the ability to increase and strengthen its programme outputs of the industry. However, for this to be a reality they would need to identify and adequately resource additional initiatives that will support its strategic approach. We view this partnership with the DAC and eThekwini as a winning recipe for success of the industry.

Cllr Nomvuzo Shabalala Deputy Mayor, eThekwini Municipality

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Profile of the local automotive sector Vehicle production in South Africa The South African automotive industry comprises seven major vehicle assemblers, a few medium and heavy commercial vehicle assemblers, and approximately 360 component manufacturers. The industry’s regional concentration is informed by the location of vehicle assemblers, with most component firms located in close proximity to BMW, Nissan and Ford (Tshwane), Volkswagen and General Motors (Nelson Mandela Bay), Mercedes-Benz (Buffalo) and Toyota (eThekwini). Notably, Toyota is the only domestic assembler producing volumes close to the minimum assembly threshold for world-scale production (200,000 units). South African assembly is skewed in favour of LCV production, with the greatest proportion of this production linked to the increased output of the Toyota Hilux/Fortuner. South Africa started exporting in 1998 and from around only 10,000 units annually, over 280,000 units were exported in 2008. Notably, Toyota exported almost as many vehicles as all other domestic assemblers combined.

Automotive Policy The key driver of the South African automotive industry’s strong export (and import) orientation is the national government’s automotive industrial policy, the Motor Industry Development Programme (MIDP). The main instruments of the MIDP have been falling nominal duties combined with export assistance, derived from the ability to offset import duties. While nominal duties on imported vehicles remained moderately high at least in the MIDP’s early stages, the ability to rebate import duties by exporting has enabled importers to bring in vehicles at low effective duty rates. Import-export complementation has also enabled assemblers to use import credits to source components at close to international prices, so declining nominal protection on vehicles has to some extent been offset by reduced protection for components. There has therefore been a significant incentive to assemble locally. The MIDP will be replaced by a new national automotive policy, the Automotive Production and Development Programme (APDP), on 1 January 2013. The biggest change to be affected by the APDP relates to its introduction of a market neutral Production Incentive (PI), which replaces the MIDP’s export benefits. This represents a fundamental shift in policy direction. The new programme will benefit the local industry in general and not only certain exporting sectors, as is presently the case. Importantly, the APDP is focused on incentivising local value addition, which should lead to local industry growth at 1st, 2nd and 3rd tier levels, thereby increasing local content in South African assembled vehicles. South African industry projections to 2020 see significant expansion over the next decade, despite the global credit crisis. Production is moreover projected to be more or less equally split for the domestic and export markets, with 659,032 units projected for domestic market consumption and 528,300 for export 7


markets. This will result in substantial manufacturing value added (MVA) and employment growth. The industry’s manufacturing value added is expected to grow from around R40 billion in 2007 to well over R100 billion in 2020 (in 2007 Rand value terms). Similarly, employment is projected to grow from 120,940 to 202,820.

Automotive production in KwaZulu-Natal The KwaZulu-Natal automotive industry is dominated by the Toyota manufacturing complex in the Durban Southern Industrial Basin (SIB). With installed capacity of 220,000 vehicles, the plant produced 142,811 vehicles in 2007 (29% of all vehicles produced domestically). In addition, Volvo and MAN have heavy vehicle assembly plants in the eThekwini Municipal Area, although their production volumes are comparatively low and operations are principally assembly orientated. Bell Equipment, the capital equipment manufacturer in Richards Bay, is a major purchaser of certain types of auto components, and undertakes a higher level of manufacturing activities. Total MVA from the KwaZulu-Natal automotive industry in 2007 can be estimated at approximately R11.6 billion, 90% of which is in the eThekwini municipal area, 5% in Pietermaritzburg, and the balance in the rest of KwaZulu-Natal (Ladysmith, Howick, and Stanger). Approximately half of this MVA, derived from R33.5 billion in sales, was generated from sales into the domestic market, and the balance from exports.

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Cluster conceptual model Overview The principle of clustering is in essence one of enhancing the competitiveness of a regional industry through collective interventions, which are more likely to be successful than isolated efforts. Clustering efforts are therefore based on undertaking rigorous research followed by the facilitation of joint activities or interventions through securing firm-level input into the specific opportunities identified.

Methodology A successful and sustainable clustering model is dependent on a range of key principals, the most fundamental of which are: 1. Partnership A balance between private sector and public sector objectives and interests needs to be maintained, with this principle applicable to goals, commitment, time, and funding. 2. Industry leadership and ownership Industry leadership and ownership enables higher levels of commitment from industry and ensures validity of cluster initiatives. 3. Trust relations Clustering represents a partnership between the public and private sector that is enabled by cluster facilitators. Transparency, reliability and accountability are important in the relationships that exist between the various parties 4. Reliability and consistency A cluster’s credibility is enabled through reliable and consistent delivery, with this taking place within a framework of defined objectives, transparent leadership and strong trust relations. 5. Flexibility The ability to adapt to changing external factors is important and as such a cluster should be able to adapt to emerging industry threats and opportunities while keeping within a framework that maintains credibility and accountability.

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Executive function Executive Committee The DAC is an industry driven initiative, drawing on the leadership and expertise of individuals from a broad range of automotive member firms and using it to identify and address a wide variety of challenges confronting the automotive industry. The Executive Committee’s responsibilities can be considered to be primarily: 1. Strategic direction and oversight of programme implementation 2. Corporate governance and compliance

The members of the Executive Committee for the year ending 31 December 2011 are listed below. Z. Xaba

HR Director Kaymac Group

Chairman of Executive Committee Chairperson of Skills Development TSC

A. Turner

Managing Director Ramsay Engineering

Deputy Chairman of Executive Committee Chairperson of Localisation TSC

S. Konar

Director: Supply Chain Smiths Manufacturing

Chairman of Infrastructure TSC

D. Msomi

Group HR Manager Feltex Automotive Division

Chairman of Transformation TSC

A. Holmes

Commercial Director Behr South Africa

Chairman of Growth TSC

B. Muggeridge

General Manager Feltex Fehrer

Chairman of Manufacturing Excellence TSC

S. Tulsiram

Head Economic Development eThekwini Municipality

eThekwini Municipality Representative

S. van der Ham

Department Manager Toyota Boshoku South Africa

Nominated Toyota Representative

T. Waldburger

Director Behr South Africa Manager Supplier Development Purchasing Toyota South Africa Motors General Manager Purchasing Toyota South Africa Motors Managing Director B&M Analysts Chairman B&M Analysts

Nominated Industry Representative

S. Pillay

T. Rootman D. Comrie Prof J. Barnes

Nominated Toyota Representative

Nominated Toyota Representative Non-Voting Chief Facilitator Non-Voting Facilitator

1. Thabani Shale served as a non-voting facilitator until April 2011. 2. Jan Smuts served as a non-voting facilitator until October 2011. 3. Nigel Ward served as a Nominated Toyota Representative until November 2011. 4. Hassim Jamal served as a Nominated SME Representative until November 2011.

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Constitution The activities of the DAC are governed by its Constitution. The constitution specifies, amongst other things, objectives, membership requirements, decision making processes and the appointment of a facilitation service provider.

Compliance and transformation The Executive Committee pro-actively identifies and puts in place mechanisms to ensure that the DAC is compliant with relevant legislation. Appropriate measures have therefore been put in place to ensure compliance the Municipal Finance Management Act (MFMA) and the Competition Act. The Cluster is a verified ‘Level 4 contributor’, or what the Codes define as being 100% B-BBEE compliant.

Facilitation Cluster facilitation services are provided by an independent team from Benchmarking & Manufacturing Analysts SA (Pty) Ltd (B&M Analysts) appointed by the Executive Committee. Founded in 1997, B&M Analysts’ primary areas of expertise and service provision include cluster facilitation, competitiveness benchmarking and upgrading, project management, training, and policy and strategy research services. These services are provided to government, non-government organisations (NGOs), clusters, industry associations, and manufacturing companies. B&M Analysts is a verified ‘Level 3 contributor’, or what the Codes define as being 115% B-BBEE compliant. For more information on B&M Analysts please visit www.bmanalysts.com.

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Programme activities

Executive Committee

Growth

Supplier Competitiveness

Skills Development

Infrastructure

Transformation

Manufacturing Excellence

Growth Programme

Overview The DAC identified market access and investment support as being central to facilitating growth opportunities for the KwaZulu-Natal automotive industry. These strategic issues are handled under the auspices of the Growth Programme. The priorities of the Growth Programme are as follows: •

The development of the necessary domestic and international market knowledge and skills to support current and future growth

The facilitation of local and export market opportunities

Focus on high level activities identified as strategic to the local industry’s development and growth

Development of Market Knowledge and Skills The Growth Programme has focused attention on ensuring that all member firms have the necessary market knowledge and skills. This includes presentations and engagements with several stakeholders, including the OEM Council and the Department of Trade and Industry. Areas covered have included the Consumer Protection Act, King III and the Competition Act, as well as the Automotive Investment Scheme. In addition, support has been offered to member firms and their suppliers in relation to the Automotive Production and Development Programme (APDP) in the form of general and one-on-one sessions, as well as the development of an APDP Supplier Benefit Model. Facilitate Market Opportunities To ensure that member firms are aware of upcoming local and international events such as trade shows and missions, a calendar is updated and distributed to members on a monthly basis. In addition, firms are supported to participate in local trade shows such as Automechanika South Africa and the

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Johannesburg International Motor Show, and benefit from inbound missions such as the Thailand visit. The Growth programme also facilitated a Study Tour to Turkey which entailed visits to a number of leading automotive suppliers, as well as the OTOMOTIV Exhibition that was held in Istanbul. Special Projects The Growth Programme identified and focused on two initiatives that are considered to be of relevance to the growth of the industry. These pertain to local testing and design capabilities.

Localisation Programme

Overview The low levels of local content in the automotive value chain undermine sustainable competitiveness of the sector principally through the exposure to cost-raising factors such as exchange rate volatility, duties and tariffs, and logistical costs. The activities of the Localisation Programme are directed at addressing the challenge of supplier competitiveness and localisation. The priorities of the Localisation Programme are as follows: •

Maintain focus on collaborative Tier 2 supplier development by Tier 1 suppliers.

•

Deepen Tier 2 supplier development support in collaboration with key organisations.

•

Continue with existing initiatives directed at strengthening Tier 1 purchasing functions.

Development for Tier 2 suppliers Tier 1 member firms are encouraged to view the Tier 2 orientated supplier development activities of the DAC as being a key component of their owned efforts to develop their suppliers. The diagram below outlines the interrelationship between the most relevant of these activities.

1. Coordinated capacity building by customers

2. Rapid benchmark assessment

3. Gap analysis & recommendations

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4. Six Sigma based capacity building & project implementation

5. ...


Activity 1: Coordinated capacity building by customers Commonly referred to as the JSAD programme, this activity provides supplier development support in the form of capacity building to key Tier 2 suppliers. The capacity building is typically provided by Tier 1 customers on a collaborative basis, or alternatively by self-funded partner organisations. During 2011 capacity building sessions dealt with the following subjects: Productivity, Project Charters, Occupational Health and Safety, APQP and PPAP and Finance for non-financial managers. Activity 2: Rapid benchmark assessment A basic operational competitiveness assessment of 14 Tier 2 suppliers was undertaken. The findings from these assessments yielded new insights into challenges facing Tier 2 suppliers as well as opportunities for competitiveness improvement. Activity 3: Gap analysis & recommendations A gap analysis methodology was developed and successfully implemented in partnership with the NTF II. The NTF II is in turn a partnership between the Centre for the Promotion of Imports (CBI) and the International Trade Centre (ITC). A report containing gap analysis findings and associated recommendations was compiled for 25 suppliers. Activity 4: Six Sigma based capacity building & project implementation. 20 suppliers were trained on the ‘Art of Effective Problem Solving’, a course based on the fundamentals of Six Sigma. Participating suppliers were also provided with project specific implementation guidance. Development of purchasing skills of Tier 1 firms The purchasing function at firms wields the most influence over suppliers and is the department that interacts most with suppliers. A significant emphasis therefore continues to be placed on developing the individuals in this function at firms so that purchasing decisions are made taking into account term competitiveness and sustainability considerations. The DAC accordingly conducted best practice workshops for purchasing professionals. The following workshops were conducted: 1) Improving supplier quality performance 2) Raw material beneficiation and the automotive industry 3) Creating a mindset of cost reduction in supply chains International experts Martin Bitter and Jan Oude Elferink presented a session at a best practice workshop on Cost Price Calculations.

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Skills Programme

Overview Attracting, developing and retaining certain skill sets is critical to the automotive sector. The focus areas of the Skills Programme are aligned with these challenges. The priorities of the Skills Programme are as follows: •

Promote HR excellence within individual member firms – spanning attraction, development and retention.

Maintain programmes focused on Management and Engineering skills.

Introduce skills programmes directed at Team Leaders, Artisans and Operators.

Maintain/expand existing HIV and AIDS programme.

Human Resource excellence HR forums and capacity building sessions were held on a quarterly basis. Through these interactions HR professionals from a wide range of member firms were provided with insights into best practices and current HR-related issues. Key subjects covered included: B-BBEE and socio-economic development, Optimising Access and the use of Discretionary Grants, Unlocking people’s potential through coaching and Talent Development Management. Engineering Graduate Development Programme The initiative is a cluster-based initiative involving multiple firms in order to leverage synergies in areas such as recruitment of talent, development of common modules and standards for graduates in training, common evaluation mechanisms, graduate exchanges between firms to enhance transfer of skills, increased number of total skilled engineers entering the industry, and potentially improved access to funding subsidies. The programme aims to provide graduates with Mechanical Engineering and Industrial Engineering qualifications with the necessary outcomes-based training and work experience to become Design, Industrialisation, Process, Purchasing/Logistics, Quality, Lean Manufacturing or Project Engineers. A total of 12 graduates had either been enrolled in or completed the 24 month programme as of the close of 2011.

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Team leader skills development An NQF 5 level team leader skills development programme has been developed by B&M Analysts. The programme focuses on Lean Manufacturing fundamentals. Participating companies will be able to apply for a discretionary grant from the MerSETA for the programme, potentially enabling a refund of almost all training costs. HIV and AIDS programme The DAC continued the rollout of the successful HIV and AIDS initiative that has been established in collaboration with a variety of strategic partner organisations. Over 40% of member firms are currently making use of the initiative.

Infrastructure Programme

Overview Provision and availability of competitive and reliable infrastructure and infrastructure-related services is an important competitiveness determinant of industry. In the short term, the DAC is engaging with opportunities to support optimisation of value chain efficiencies within current operational constraints. This support is principally operational in nature with a view to reducing cost and improving reliability given current environmental constraints. Additional priority focus areas that influence infrastructural cost and reliability will be examined in the long term. The priorities of the Infrastructure Programme are as follows: •

Support improved logistics efficiencies through best practices.

Ensure competitive logistics costs from service providers.

Facilitate optimal benefit from Eskom’s energy efficiency programmes (incentives).

Logistics Logistics meetings were held on a quarterly basis, providing a platform for sharing supply chain best practices. Specific focus areas of these sessions included: A Sea Freight Survey, Update on Developments Related to the Ports and the Old DBN International Airport Site, Optimisation of Internal Logistics, Warehouse and Distribution Management Logistics, Line Support Logistics, State Logistics Survey, Incoterms, Customs Control Bill and Resource Efficiency. Cluster members were also provided with access to preferential sea freight rates on key inbound logistics routes.

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Lastly, regular updates on key issues such as changes to major shipping routes and port congestion were provided via logistics newsflashes. Resource efficiency Initial attempts to develop an energy efficiency self-audit tool for firms proved unsuccessful, however, discussions with the National Cleaner Production Centre (NCPC) yielded an opportunity for members to access both detailed energy efficiency audits as well as related energy efficiency support. Full roll-out of this initiative is expected to take place during 2012.

Transformation Programme

Overview The objective of this focus area is to improve industry performance across all B-BBEE indicators. This will be undertaken through a focus on promoting B-BBEE best practices amongst established firms while at the same time developing and promoting Black owned SMEs. The priorities of the Transformation Programme are as follows: •

Continue to capacitate members in the field of B-BBEE in support of achieving improve B-BBEE status on a sustainable basis.

•

Provide development support to Black-owned SMEs (diagnostic assessments, business plan training, business plan development support and assistance with business plan implementation).

B-BBEE best practice forum A number of quarterly best practice workshops and meetings were held during 2011, with these providing a forum for dialogue on the latest thinking in respect of enhancing B-BBEE performance. Subjects covered included Socio-economic development initiatives, Management Control, Employment Equity, Skills Development & Enterprise development, Disability, Basic Understanding of B-BBEE, Equity Equivalence, Legislative changes and Tools for B-BBEE. SME development A support programme for emerging Black owned manufacturing SMEs was successfully implemented, with a total of six SMEs benefitting from this initiative during 2011. Key components includes diagnostic assessments, business plan training, business plan development support and assistance with business plan implementation.

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Manufacturing Excellence Programme

Overview A strong relationship exists between the DAC and the KwaZulu-Natal Chapter of the South African Automotive Benchmarking Club (SAABC). This Chapter is treated as the Manufacturing Excellence Programme of the DAC. The South African Automotive Benchmarking Club (SAABC) is a continuous improvement programme that was established in 1997 to support the South African automotive component manufacturing industry to achieve World Class Manufacturing levels. Benefits of participation in this particular programme: •

The objective assessment of relative competitiveness so as to identify opportunities for improvement through the application of proven practices, processes and experiences of other firms

The alignment of strategic goals and operational priorities to ultimately improve competitiveness, profitability, and sustainability.

Benchmarking assessments Each member firm is provided with a confidential, customised, in-depth benchmarking assessment. The ‘Market Driver’ benchmarking methodology employed by B&M Analysts represents leading thinking in respect of operational and value chain competitiveness benchmarking. The global competitiveness database used in the benchmarking process contains data on 362 companies from South Africa, North America, Central Europe and the Asia Pacific region. All major supplier sub-sectors are represented in the database.

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Best Practice Networking Facilitators have frequently enabled an exchange of best practice knowledge between consenting member firms in the past and 2011 sees increased focus in this form of knowledge exchange through the provision of a dedicated allocation of facilitation time for each member firm. World Class Manufacturing Workshops & Factory Visits Senior management and best practice workshops were conducted across the SAABC’s five regional hubs. These workshops principally took the form of practically orientated World Class Manufacturing workshops on subjects such as Just-in-Time (JIT), Total Quality Management (TQM), and Continuous Improvement (CI). Member firms have the opportunity to attend any (or all) sessions across the country. Newsletters Newsletters that explore findings emerging from the latest benchmarking data and automotive trends are compiled and circulated to members on a quarterly basis.

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Highlights from 2009 - 2011 Automotive Production and Development Programme (APDP) Challenge Change in national automotive policy by the Department of Trade and Industry (DTI). New automotive policy and associated incentive mechanisms are not well understood by firms but are nevertheless of major strategic importance to their futures. Intervention The DAC runs information sharing sessions to keep firms informed of developments during the policy finalisation process. These were then followed by capacity building sessions for Executives directed at assisting firms understand how the APDP will affect their businesses. A modelling tool was developed to assist firms calculate the benefit that their company will derive from the APDP, with this in turn accompanied by firm-level assistance. Output Firms are able to develop new strategies that will better position them under the APDP (which becomes fully effective as of 1 January 2013). For most companies this will enable further growth opportunities.

Supplier development Challenge Financial and non-financial resource constraints were identified as inhibiting the supplier development activities of Tier 1 suppliers directed at improving the competitiveness of Tier 2 suppliers. In many cases this resulted in the complete absence of proactive supplier development activities. Intervention A coordinated supplier development initiative was implemented towards the end of 2007. Through this initiative Tier 1 firms share their supplier development resources so as to provide maximum support in identified areas to selected suppliers. Output As of 2011 a total of 10 Tier 1 customers are cooperating in a structured manned to support the development of 110 Tier 2 suppliers. This initiative has laid a solid foundation for more in-depth supplier development support. 20


Purchasing Skills Development Challenge In 2002 the DAC identified the possible need to develop the procurement function of firms in the local automotive industry. Members were surveyed and the results affirmed the need for an intervention focused on developing the skills of procurement specialists. Intervention The DAC, in partnership with the Durban University of Technology Business Studies Unit (DUT BSU), developed a certificate level programme that was customised to automotive industry requirements. A diploma level programme was then added at a later date, providing for further skills progression and specialisation. Output As of the close of 2011 over 100 people have successfully been awarded either the Certificate or Diploma in Automotive Purchasing Management that have been run in partnership with the DUT’s BSU since 2002.

Graduate Development Programme for Engineers Challenge Shortage of engineering skills identified as a common problem amongst member firms. Graduate development activities in the field of engineering established to be very limited or absent. Intervention A modular, experiential based graduate development programme was developed in collaboration with the Deutsche Investitions und Entwicklungsgesellschaft mbH (DEG) and key firms. This programme is based on developing skill competencies in line with industry engineering skills requirements. Output A modular graduate development programme has been established that can be adopted by member firms, funding for mentoring and training has been secured to further incentivise firms to recruit and develop new engineering graduates, and a total of 12 graduates are registered on the programme.

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Management Development Programme (MDP) Challenge Management skills identified as a potential future competitiveness inhibitor in industry. An opportunity to supplement work experience with appropriate management training was identified. Intervention An automotive orientated MDP was developed in partnership with the University of Stellenbosch Business School. The programme is run from the DAC’s offices and is competitively priced. Output 15 people have already graduated and a second intake of the programme is planned for later in 2012.

HIV and AIDS Challenge The DAC prioritises the need to understand and mitigate the impact of HIV and AIDS amongst DAC member employees. Intervention The identified intervention was scoped to (1) assist member companies to implement comprehensive HIV and AIDS workplace programmes, (2) drive down the costs associated with HIV and AIDS programmes through joint action, and (3) increase knowledge sharing and partnership amongst member companies. Output The programme has the support of over 40% of member firms. Operational components of the programme are as follows: •

Baseline Assessment

KAP survey (on a company level)

Management capacity building

Steering committee training

Champions training

Peer educator training

Awareness/education campaign

Company aftercare and support

Voluntary Counselling and Testing 22


Development of Black owned Small to Medium Enterprises (SMEs) Challenge The development of Black owned manufacturing SMEs that have the potential to supply the automotive industry is prioritised. Intervention An SME incubation methodology that was conceptualised based on the fundamentals of (1) identifying high potential SMEs, (2) evaluating the requirements of the individual SME in relation to the objective of developing the SME as an automotive supplier, (3) developing a business plan for each individual SME, (4) providing appropriate competitiveness upgrading and business system support, and (5) enabling market linkage opportunities. Output The model was implemented in partnership with TIZN. Six SMEs benefitted from participation in the programme in 2011.

International Study Tour – Turkey Challenge Turkey was identified as having a highly competitive automotive supply base that is well position to supply both a growing domestic vehicle assembly sector as well as vehicle assemblers based in the European Union. Further there is a fair degree of commonality amongst models manufactured by Toyota in South Africa and Turkey respectively. Understanding the success of the Turkish automotive industry was therefore identified as being of potential benefit to the KwaZulu-Natal automotive industry. Intervention An outbound study tour to Turkey was undertaken by the DAC during November 2011, with the itinerary including visits to ten different Turkish automotive suppliers. Representatives from four DAC members, a DAC facilitator, and representatives from TIKZN participated in the tour.

Output The South African delegates identified a variety of factors that enable Turkey’s advantage as an automotive manufacturing location, with these including geographic location and a Free Trade Agreement (FTA) with the European Union, Government support, good management systems, a high degree of speed and flexibility within factories, high levels of worker productivity and highly skilled workforce. This information has been codified in the form of a post trip review brief feedback and workshop. Linkages between the South African delegates and their Turkish counterparts have also been established, opening the door for discussions relating to sourcing, knowledge exchange and design collaboration.

23


Durban Automotive Cluster (Registration number: 2005/035247/08)

Annual Financial Statements for the year ended 31 December 2011 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Durban Automotive Cluster as of 31 December 2011, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Supplementary information Without qualifying our opinion, we draw attention to the fact that supplementary information set out on page 26 does not form part of the annual financial statements and is presented as additional information. We have not audited this information and accordingly do not express an opinion thereon.

Report on Other Legal and Regulatory Requirements With the written consent of all members, we have performed certain secretarial duties. PKF DURBAN Registered Auditors Chartered Accountants (S.A.) Practice number: 906352E 22 June 2012 Durban

24


Directors’ report The directors submit their report for the year ended 31 December 2011. 1. Review of activities Main business and operations The company is engaged in the provision of cluster-based development support to the automotive manufacturing sector in Durban and surrounding areas and operates principally in South Africa. The operating results and state of affairs of the company are fully set out in the attached annual financial statements and do not in our opinion require further comment. 2. Going concern The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent and commitments will occur in the ordinary course of business. 3. Events after the reporting period The directors are not aware of any material fact or circumstance arising between the end of the financial year and the date of this report that would require adjustments to the annual financial statements. 4. Directors The directors of the company during the year and to the date of this report are as follows: D.S. Comrie A.G. Holmes S. Konor E.D. Msomi C.B.M. Muggeridge T.F.J. Rootman A.I. Turner Z.D. Xaba 5. Secretary The company had no secretary during the year. The registered office of the company is: 2nd Floor 12 on Palm Boulevard Gateway 6. Auditors The directors recommend that PFK Durban continue in office as the auditors in accordance with the Companies Act of South Africa.

25


Statement of financial position Figures in Rand

Notes

ASSETS Current Assets Trade and other receivables Cash and cash equivalents

2011 R

2010 R

306 001 304 253

185 945 886 289

TOTAL ASSETS

610 254

1 072 234

EQUITY AND LIABILITIES Equity Accumulated loss

(80 223)

(169 710)

595 739 94 738 690 477 610 254

428 450 813 494 1 241 944 1 072 234

2011 R 2 127 554 240 157 (2 284 504) 83 207 6 280 89 487 89 487

2010 R 2 187 240 34 500 (2 302 870) (81 130) 13 245 (67 885) (67 885)

3 4

LIABILITIES Current Liabilities Trade and other payables Income received in advance

5 6

TOTAL EQUITY AND LIABILITIES

Statement of comprehensive income Figures in Rand

Notes

Revenue Other income Operating Expenses Operating profit (loss) Investment revenue Profit (loss) for the year Other comprehensive income Total comprehensive income (loss)

7

26


Member listing Company name

Altech UEC

Telephone

+27 (31) 508 2800

Facsimile

+ 27 (31) 539 3370

Email

info@uec.co.za

Website

www.uec.co.za

Company name

Apollo Tyres South Africa

Telephone

+27 (31) 242 1111

Facsimile

+27 (31) 242 1366

Email

marketing@dunlop.co.za

Website

www.dunloptyres.co.za

Company name

Aunde South Africa

Telephone

+27 (31) 913 8000

Facsimile

+27 (31) 913 8001

Email

southafrica@aunde.com

Website

www.aunde.com

Company name

Autostick Screenprint

Telephone

+27 (31) 309 1444

Facsimile

+27 (31) 309 1999

Email

autostick@eastcoast.co.za

Company name

Autovest

Telephone

+27 (31) 536 8005

Facsimile

+27 (31) 536 8012

Email

tedw@autovest.co.za

Website

www.autovest.co.za

Company name

Avlock International

Telephone

+27 (31) 579 1510

Facsimile

+27 (31) 579 1520

Email

query@avlock.co.za

Website

www.avlock.co.za

27


Company name

Behr South Africa

Telephone

+27 (31) 719 7600

Facsimile

+27 (31) 705 3188

Email

cheryl.rundle@za.behrgroup.com

Website

www.behrgroup.com

Company name

Bell Equipment

Telephone

+27 (35) 907 9111

Email

sales@bellequipment.com

Website

www.bellequipment.com

Company name

Commercial Elastic

Telephone

+27 (31) 465 5036/7

Facsimile

+27 (31) 465 6894

Email

cem@icon.co.za

Website

www.commcem.co.za

Company name

Connectco

Telephone

+27 (31) 902 8134

Facsimile

+27 (31) 902 6850

Email

secretariat@wjcap.com

Website

www.connectco.co.za

Company name

Duys Component Manufacturers

Telephone

+27 (31) 713 1700

Facsimile

+27 (31) 713 1727

Email

sales@duys.co.za

Company name

Expert Automotive Trim

Telephone

+27 (31) 791 0202

Facsimile

+27 (31) 791 0203

Email

pragasen@expertautotrim.co.za

Website

www.expertautotrim.co.za

28


Company name

Federal-Mogul Vehicle Safety and Protection

Telephone

+27 (31) 913 3500

Facsimile

+27 (31) 902 6156

Email

vicky.rajkumar@federalmogul.com

Website

www.federal-mogul.com

Company name

Federal-Mogul Powertrain Systems

Telephone

+27 (31) 717 3300

Facsimile

+27 (31) 902 6156

Email

vicky.rajkumar@federalmogul.com

Website

www.federal-mogul.com

Company name

Feltex Automotive Trim

Telephone

+27 (31) 460 4200

Facsimile

+27 (31) 460 4290

Email

autotrim@feltex.co.za

Website

www.feltex.co.za

Company name

Feltex Fehrer

Telephone

+27 (31) 460 4200

Facsimile

+27 (31) 460 4290

Email

automoulding@feltex.co.za

Website

www.feltex.co.za

Company name

G.U.D. Filters

Telephone

+27 (31) 910 3111

Facsimile

+27 (31) 902 4889

Email

marketing@gud.co.za

Website

www.gud.co.za

Company name

Hesto Harnesses

Telephone

+27 (32) 552 1001

Facsimile

+27 (32) 552 5414

Email

zan@hesto.co.za

Website

www.hesto.co.za

29


Company name

Hulamin

Telephone

+27 (33) 395 6911

Facsimile

+27 (31) 394 6335

Email

hulamin@hulamin.co.za

Website

www.hulamin.co.za

Company name

IJ Component Manufacturers

Telephone

+27 (31) 305 9543

Facsimile

+27 (31) 301 1144

Email

mkhize@saol.com

Website

www.ijcomponents.co.za

Company name

Kaymac Structural Foam

Telephone

+27 (33) 387 1507

Facsimile

+27 (33) 387 2911

Email

sales@kayroto.co.za

Website

www.kayroto.co.za

Company name

L&J Tool and Engineering Works

Telephone

+27 (31) 914 4294

Facsimile

+27 (31) 914 4893

Email

reception@ljtools.co.za

Website

www.ljtools.co.za

Company name

Maccvert Precision Engineering

Telephone

+27 (31) 468 9360

Facsimile

+27 (31) 468 9381

Email

maccvert@telkomsa.net

Website

www.maccvertengineering.co.za

Company name

MacDonald Precision

Telephone

+27 (31) 461 3016

Facsimile

+27 (31) 461 3091

Email

info@macdonaldprecision.co.za

Website

www.macdonaldprecision.co.za

30


Company name

Maritzburg Engineering

Telephone

+27 (33) 386 9081

Facsimile

+27 (33) 386 1970

Email

mareng@mweb.co.za

Company name

Marine & General Engineering

Telephone

+27 (31) 461 5008

Facsimile

+27 (31) 461 5012

Email

stevenp@marineandgeneral.co.za

Website

www.marineandgeneral.co.za

Company name

Pfisterer

Telephone

+27 (33) 397 5400

Facsimile

+27 (33) 387 6377

Website

www.pfisterer.co.za

Company name

Pi Shurlok International

Telephone

+27 (31) 845 4700

Facsimile

+27 (31) 571 0825

Email

enquires@pi-shurlok.com

Website

www.pi-shurlok.com

Company name

Preformed Line Products

Telephone

+27 (33) 397 5800

Facsimile

+27 (33) 387 7094

Email

plppmb@preformedsa.co.za

Website

www.preformedsa.co.za

Company name

Pressure Die Casting

Telephone

+27 (33) 397 5500

Facsimile

+27 (33) 397 5553

Email

enquires@pdc.co.za

Website

www.pdc.co.za

31


Company name

Ramsay Engineering

Telephone

+27 (33) 387 1575

Facsimile

+27 (33) 387 4535

Email

re@ramsay.co.za

Website

www.ramsay.co.za

Company name

Saayman Danks Electroplating

Telephone

+27 (31) 465 6858

Facsimile

+27 (31) 465 8481

Email

info@sdelectroplating.co.za

Website

www.sdelectroplating.co.za

Company name

Smiths Manufacturing

Telephone

+27 (31) 719 4911

Facsimile

+27 (31) 719 4240

Email

info@smiths.co.za

Website

www.smiths.co.za

Company name

Springquip Manufacturing

Telephone

+27 (33) 342 8650

Facsimile

+27 (33) 342 5064

Email

mike@springquip.co.za

Website

www.springquip.co.za

Company name

Toyota Boshoku South Africa

Telephone

+27 (31) 949 4000

Facsimile

+27 (31) 949 4100

Email

bsainfo@toyota-boshoku.sa.com

Website

www.toyota-boshoku.sa.com

Company name

Toyota South Africa Motors

Telephone

+27 (31) 910 2911/4750

Facsimile

+27 (31) 902 3854

Email

ccc@tsb.toyota.co.za

Website

www.toyota.co.za

32


Company name

Toyota Tsusho Africa

Telephone

+27 (31) 949 5000

Facsimile

+27 (31) 949 5005

Email

andrew.velleman@ttaf.co.za

Website

www.ttaf.co.za

Company name

Truth Electronic Manufacturing

Telephone

+27 (31) 822 8555

Facsimile

+27 (31) 563 8555

Email

terence@truthelectronics.co.za

Website

www.truthelectronics.co.za

Company name

Wave Paper

Telephone

+27 (31) 705 3344

Facsimile

+27 (31) 705 3346

Email

Andrew@wavepaper.co.za

Website

www.wavepaper.co.za

Company name

Webroy

Telephone

+27 (33) 387 2331

Facsimile

+27 (31) 387 3026

Email

sales@webroy.co.za

Website

www.webroy.co.za

33


Notes _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________

34


Contact Information Durban Automotive Cluster Tel: +27 (0) 31 764 6100 Fax: +27 (0) 86 607 4510 Email: dac@bmanalysts.com Unit 3 St Heliers Office Park Valdean Rd Gillitts 3610 South Africa PostNet Suite 10139 Private Bag X7005 Hillcrest 3650 South Africa www.dbnautocluster.org.za

36


DAC 2011 ANNUAL REPORT  

THe annual report for the Durban Automotive cluster, providing a recap on the successes of 2011 and presenting the audited financials.

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