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Powered by B&M Analysts Cluster facilitation services are provided by Benchmarking & Manufacturing Analysts SA (Pty) Ltd (B&M Analysts), an organisation that provides high value specialised support services to drive sustainable industrial development. Over the past 16 years, B&M Analysts has developed methodologies and skill sets that allow it to play a unique role in relation to supporting the competitiveness of value chains and the growth of industrial sectors. These services are tailored to support the industrial development goals of government organisations, private sector organisations and public-private partnerships (PPP). B&M Analysts is a verified Level 2 B-BBEE contributor under the Codes of Good Practice for Broad-Based Black Economic Empowerment (B-BBEE). For more information on B&M Analysts please visit www.bmanalysts.com.

About the Durban Automotive Cluster The DAC is a partnership between the eThekwini Municipality and the automotive industry in KwaZulu-Natal (KZN) established in January 2002 with the primary purpose of developing the competitiveness of the KZN automotive industry. DAC member companies represent over 90% of all automotive manufacturing activity in KZN. The overarching objective of the DAC is to grow the local manufacturing value addition (MVA) by 100% in real terms between 2012 and 2020. MVA is the value addition through manufacturing; it is revenue less consumables and services. The cluster has chosen to focus on MVA growth as this encapsulates the activities throughout the value chain and will enable both employment and private sector investment growth, and a will achieve sustainable growth in the long run. The DAC has identified four strategic focus areas as being core to attaining local growth and increased cost competitiveness in the KZN automotive industry: • Market & Technology Access • Manufacturing Excellence • Skills Development • Infrastructure & Materials For more information on the Durban Automotive Cluster please visit www.dbnautocluster.org.za.


Contents Powered by B&M Analysts About the Durban Automotive Cluster

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Focus Article 1: Reflections on the development of the South African automotive industry’s competitiveness development under the MIDP

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Focus Article 2: Labour Legislation Changes

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Market and Technology Access Export promotion and facilitation Africa Series Workshops Discovering Africa Manufacturing Excellence Programme Skills Development Programme

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Focus Article 1: Reflections on the development of the South African automotive industry’s competitiveness development under the MIDP Author – Professor Justin Barnes (10 March 2014) The boom in exports evident over the period of the MIDP was largely driven by the import-export complementation scheme and hence by the strategic intent of exporting firms to earn sufficient import credits to offset their duty exposure in the domestic market. Economic theory would attribute growing exports by multinational corporations from a developing economy such as South Africa, to efficiency seeking FDI targeted at taking advantage of the comparatively low cost structure of the developing economy. And yet this was patently not the case under the MIDP. Firms exported primarily so they could cost effectively import products into the domestic market, hence the continued deterioration of the trade balance for automotive products. This does not mean that the South African automotive industry did not improve its competitiveness under the MIDP. The evidence for both vehicle assemblers and automotive component manufacturers is unequivocal in this regard. Vehicles produced per employee amongst the seven vehicle assemblers increased from only 9.9 in 1999 to 15.5 in 2006, and 18.5 in 2012. At the same time, a number of South African assemblers, such as Mercedes Benz and BMW, have received international awards for the quality of the vehicles sold in export markets.

Source: NAAMSA for employment data; OICA for production data


Data from the South African Automotive Benchmarking Club (SAABC) for automotive component manufacturers reveals a very similar picture. Whilst not strictly comparable from one year to the next due to constantly shifting participation in the SAABC, the average performance standard of automotive component manufacturers improved markedly over the period 1998/1999 to 2012. This is made explicit in Table 1 below. For each of the seven metrics analysed the performance of the set of South African firms benchmarked annually improved markedly over the period. For certain Key Performance Indicators (KPIs) performance improved very significantly. For example, customer return rates improved from 3,270 parts per million (ppm) in 1998/9 to 254 ppm in 2006 to 226 in 2012, an improvement of 93.1%.

Notwithstanding these improvements, the major competitiveness challenge for the South African automotive components industry over the duration of the MIDP appears to have been four-fold. First, the industry improved its performance off a weak base in the late 1990s. While it may have closed some of the gap on international performance standards by 2012, it remained some distance behind in certain performance areas. Examples of this in Table 1 include customer return rates, internal scrap rates, and absenteeism. Despite improving by 93.1%, 59.5% and 31.8% respectively from 1998/9 to 2012, South African performance standards lagged that of the international firms benchmarked in 2012 by 11.9%, 11.8% and 13.3% for these measures.

Table 1: Competitiveness improvements in the performance of the South African automotive components industry, 1998/9 to 2012, and international comparisons


Second, the South African automotive industry’s international benchmarks have changed significantly over the duration of the MIDP. The automotive components industry has become fully internationalised over the last two decades. Multinational organisations with global production strategies now dominate the first two tiers of the automotive supply chain. They have the capability to discern the best locations for their new production facilities at a global level and focus their investments across the most competitive locations only. Mid and high-cost production locations have lost out in the process. The only exceptions to this relate to instances where (a) the volumetric profile of components produced renders them expensive to trade across long distances, (b) sub-assemblies need to be supplied to vehicle assemblers on a Just in Time or Just in Sequence basis, or (c) trade barriers prevent the supply of the components across national economies. This internationalisation has resulted in an intensification of competitive pressure across the automotive supply chain, forcing price discipline and significantly improved performance across a range of critical nonprice factors such as inventory management, quality, reliability, flexibility and innovation. In an ongoing review of the Australian automotive industry, which is in precipitous decline , by the Australian government’s Productivity Commission (2013), it is for example noted that the price of the Toyota Camry in the United States reduced by 1% per annum in real terms over the decade to 2010, while at the same time having $1,400 worth of additional safety, fuel efficiency, and quality improvements made to the vehicle (Productivity Commission, 2013: 17). These cost adjustments have been countered by a relentless search for savings in both assembly and component costs.

Third, several leading automotive economies in 2012, such as China, India and Thailand, did not feature as major global competitors in 1995. These economies have the advantages of large domestic markets, major regional market opportunities, cheap production costs and growing technological capabilities. In combination with the internationalisation of the automotive components industry, these economies have fundamentally changed the international automotive landscape. A recently completed, detailed analysis of the comparative competitiveness of the South African and Thai automotive components industries from 2008 to 2013 (see Barnes, Black and Tekachanont: 2014) revealed some alarming performance distinctions: o Thai employee costs ranged from one quarter to two-fifths of South African employee costs. o Despite lower employee costs, Thai manufac turing standards were superior to their South African equivalents for all five of the Key Performance Indicators explored (cost control, quality performance, operational flexibility, op erational reliability and attendance manage ment). o Certain Thai operating overheads such as elec tricity (3%) and water (16%) were considerably cheaper than evident in South Africa. Only fac tory rentals were cheaper in South Africa (by 9%). Based on a model of a typical automotive component manufacturer in South Africa, the Thai operating cost advantage was calculated at 14%, given the same levels of production output as evident in South Africa. Perhaps unsurprisingly given these cost considerations (as well as the fact that the Thai automotive industry has been far more protected than the South African automotive industry over the last 15 years),


the Thai automotive industry, which produced roughly the same number of vehicles as South Africa in the mid-1990s, produced 2.4 million vehicles in 2012, four times more vehicles than the South African industry. In a presentation given to the members (mostly automotive component manufacturers) of the Durban Automotive Cluster in 2013, Toyota South Africa management highlighted the magnitude of the change by identifying the cost challenges facing South African suppliers to Toyota. According to Toyota’s calculations, the average cost of their South African sourced components was 107-110 on their Cost Index of Manufacture in 2013, with China at 91, India at 85 and Thailand at 92. Yet, the performance of the “traditional” competitors on Toyota’s CIM averaged 100 in Europe, which is much closer to average South African levels. While the South African automotive components industry has improved its competitiveness, multinational vehicle assemblers scouting the globe for cheap sources of supply have concentrated their attention on exploiting ever expanding Asian opportunities, marginalising the position of the South African components industry and limiting localisation opportunities for local vehicle assemblers. This is supported by SAABC benchmarking data for the automotive components industry, which shows that average capital expenditure in the South African industry has consistently lagged investment levels amongst international competitors since the late 1990s. As highlighted in Figure 1, there is no year in which SAABC capital investment data

investment data for its member firms averaged more than the investment levels of automotive component manufacturers benchmarked internationally. There are also only two years in the entire 15-year period in which average investment levels breached six percent of sales, indicating consistently repressed levels of investment in the supply chain – even during the “boom years” of the industry (2001-2006). Figure 2.

Finally, understanding the competitiveness trajectory of the South African automotive industry under the MIDP is further complicated by steep increases in factor costs associated with the cost of production in the country. While the industry has become more efficient and is operating closer to acceptable global operating standards, the input costs into operations have climbed steeply.

1 The Australian automotive industry represents an interesting counterfactual to the South African automotive industry. The Australian government aggressively reduced industry tariffs under the “Button programme” (from 27.5% in 1995 to 15% in 2001), and then to only 5% in 2010 under the Automotive Competitiveness and Investment Scheme (ACIS). This liberalisation has resulted in vehicle production dropping to less than 200,000 vehicles, with all three remaining vehicle assemblers (Ford, Holden and Toyota) confirming the closure of their Australian plants by 2017. The reasons provided for the plant closures by the MNCs is the lack of their competitiveness in the face of Asian cost benchmarks and the ease of accessing the Australian vehicle market from these economies.


Focus Article 2: Labour legislation changes and implications

This is evident for energy costs, municipal service costs (solid waste removal, water, etc.) and taxes, labour costs, skilled staff costs and national government administered prices, such as port charges. In combination, these costs have rendered the automotive industry substantially less competitive than leading automotive production economies, as highlighted South African politics has seen a rise in left-wing idein the Thai-South African automotive industry study ology. The Marikana strike which took place in August (Barnes, Black and Tekachanont, 2013). 2012 had a ripple effect of industrial action across the country. The Marikana strike was followed by additional strike action at other (platinum, gold and coal) mines and industries across South Africa. As a result of the nature of the labour relations, increased focus was placed on the South African government; and South Africa’s levels of inequality and social justice and the levels of political governance. South African economy has been under pressure to create jobs. In his 2014 Budget Speech, Pravin Gordhan introduced the various strategies to reducing our high unemployment rates which include: o Accelerated implementation of the expanded public works programme; o Community Work Programme; o Youth employment tax incentive; o Establishment of special economic zones, industrial incentives and support for agriculture and labour-intensive sectors; and o Enhanced focus on skills development and further education and training programmes. The government has also placed specific focus on the changes to legislation, passing amendments to the Labour Relations Act, Basic Conditions of Employment Act and the Broad Based Black Employment Equity Act.


This article aims to highlight these changes to the Employment Equity Act and the implications that follow. (For further information on the B-BBEE amendments, please see the DAC’s January newsletter).

The amendment aims to address unfair discrimination by employers in respect of the terms and conditions of employment for workers doing work of equal value. Previously, the common practice in South Africa in terms of wage schedules was based on historical inforLegislative changes mation and performance which may or may not be dis• The Labour Relations Amendment Bill criminatory. Poor management and lack of formalised This bill was adopted in August 2013 and aims to pro- terminology in terms of agreements since have caused vide more protection to fixed-term employees. It stipu- unequal pay in overlapping positions within a firm. A lates that employees, who are placed with an employ- differentiation will amount to unfair discrimination by er by a temporary employment service (often called the employer, unless such employer can show that diflabour broker) for longer than three months, will be ferences in wages or other conditions of employment deemed as permanent for the purposes of affirmative are based on fair criteria. action. Another vital component of the bill is that it adds additional requirements for unions to launch pro- Conclusion tected strikes, aiming to limit the regularity as well as The recent changes to the Labour Relations Amendthe hostility thereof. ment Bill, the Employment Equity Amendment Bill as • The Employment Equity Act well as the Broad-Based Black Economic EmpowerEqual pay for work of equal value: Section 6(4): Em- ment (B-BBEE) Amendment Bill have resulted in an ployers may not unfairly discriminate against employ- increase in the complexity of our already complex regees by providing different terms and conditions of em- ulatory system. In order for firms to adjust accordingployment between employees of the same employer ly, firms will need to go through a process of clarifying performing the same or substantially the same work or terminology and job descriptions of their workforce. It work of equal value that is directly or indirectly based is important that this is well documented and commuon any one or more grounds listed in subsection 6(1) or nicated accordingly. Firms will also need to establish an on any other arbitrary ground. (Department of Labour, understanding of the needs that are required in their 28 February 2014) workforce and optimally develop the skills that are needed and further restructure accordingly. Although the bill proposes changes to definition of ‘designated groups’ and an expansion of discriminato- Going forward a clear documentation of employees ry grounds, amongst others, the issue that is most con- experience, skill and responsibility is vital to avoiding cerning to industry is the introduction of the principle conflict within the workplace. of ‘equal pay for work of equal value’. 2 http://www.labour.gov.za/DOL/downloads/legislation/notices/employment-equity/drafteereg2014_part1.pdf


Market and Technology Access Policy engagement & optimisation (previously Demand side optimisation) AIS: At the previous session, a presentation of the revised guidelines was undertaken by Judith Nsuntsha, IDAD: Product Development, the Department of Trade & Industry (the dti). Numerous member firms attended the session and provided input on the revised guidelines. The DAC further distributed the revised guidelines to member firms and requested input and comment for the dti. In addition, a letter containing the comments from the quarterly session as well as additional inputs pertaining to the guidelines was compiled and submitted to the dti for consideration. Support establishment of effective national supplier development and localisation steering committee Under the umbrella of ‘localisation’, a recent committee called the Automotive Supply Chain Competitiveness Initiative (ASCCI) has been formed with the purpose of coordinating supplier development in the South African automotive industry. On 03 March 2014, Douglas Comrie, who has been appointed as Chief Facilitator for ASCCI, presented on this newly launched initiative. ASCCI is effectively a national supplier development and localisation steering committee. As a result, the initiative will have a substantial influence on initiatives moving forward to 2017. B&M Analysts has been nominated as the service provider for the initiative and the DAC will focus on identifying opportunities to support ASCCI going forward.

Identification and localisation/development of production and technologies The DAC has begun preparatory planning for its 2014 Localisation Indaba. The Localisation Indaba is expected to take place in June 2014 and will run over 2 days. The purpose of the Localisation Indaba is: o To highlight cluster experiences and successes from 2013 and review cluster priorities for the medium term o To provide a platform for the automotive sec tor to explore the localisation challenges and opportunities that exist o To provide automotive members with industry support information The programme is envisaged to include the following: o AGM (Awards, MDP Presentation, GDP Presen tation) o Workshop on Localisation of Polymers o Workshop on Localisation of Steel o OEM Purchasing Council Presentations (T1 and T2 industry presentations to OEMs) o Exhibitions by industry and service providers o One on One Meet and Greet Session: Localisation challenges for the sector


Export promotion and facilitation –

Africa Series Workshops

Africa has become a real interest point for the manufacturing and retailer members across various industries as they look for investment and growth opportunities into these countries. The Durban Chemicals Cluster hosted a morning workshop which focused solely on Nigeria. Nigeria is the most populated African country with the one of the fastest growing economies on the continent. This growing country is the second most attractive African investment country and thus there is great opportunity for industry investment in this country. The guest speakers, Michele Arde (B&M Analysts), Jan van Zyl (Novare) and Mncane Mthunzi (Massmart), allowed attendees to explore the raw facts of the country, as well as learn from other’s personal experiences. Jan Van Zyl is currently the Head of Property Development at Novare and residing in Lagos, Nigeria. Jan began his career in 1999 and has worked extensively throughout Africa. He was recruited by Shoprite in 2010 as the company’s business development manager for Nigeria and Ghana and was responsible for supporting the growth of the group from three to ten business outlets by working closely with existing and new developers and acted as project manager for all Shoprite related property projects. Jan joined Novare in February 2013 as head of property development. Jan shared his experiences with doing business in Nigeria through exploring the current situation in Nigeria, potential pitfalls and how to avoid these pitfalls. In addition to this, he also shared information on distributors, business setup and an overview on regulations. Mncane Mthunzi (Africa Food and Retail Supplier Executive at Massmart Group) is the former CEO of the Consumer Goods Council of South Africa, an industry association for the retailers, manufacturers and service pro-


Nigeria is Africa’s largest telecoms market with 121.8 million active mobile lines and has 54 million internet subscribers as at September 2013, compared with South Africa’s 11 million users. Jan also highlighted that the population in each major city is significant and allows for investment to be initiated just in one city as the market is present. Mncane also stated that Nigeria, being the most populous African country, provides for a growing market in the retail sector as the sector is also expanding due to a growing middle class. There is a hunger for first world goods and services amongst the population as Nigerians embrace technology and strive to improve themselves. Both guest speakers shared their business experience in the country and expressed that it is very expensive Doing Business in Nigeria Nigeria’s economy is on track to overtake South Afri- and difficult to do business in Nigeria as the laws and ca as the largest economy in Africa, as Nigeria had a procedures are very vague. The operating environment GDP growth of 6.1% in 2013 versus South Africa’s 1.9% of Nigeria remains difficult as there are many problemgrowth. Jan highlighted that the economy is opening atic factors to doing business in Nigeria. The four top up and fast becoming the gateway to West Africa. factors are 1) Access to funding, 2) Corruption, 3) InadThe structure of Nigeria’s GDP consists of: Agriculture equate supply of infrastructure and 4) Policy instability. (32%); Industry (39%); Manufacturing (3%) and Ser- Infrastructure supply, specifically electricity, is a major vices (26%). Nigeria’s services sector has mushroomed concern for operating in the country. in recent years but is not effectively captures by current GDP statistics. He has been the Managing Director of the Black Management Forum for three years, and worked for Microsoft in a Sales Executive role. Mncane’s career span is across a number of industries which includes Retail, Transport, Industrial Products, Telecommunications, Broadcasting Information Technologies and the Government. Mncane’s experience in Nigeria is extensive as he establishes the retail outlets in Nigeria. Mncane shared the steps taken and challenges faced while setting up businesses in the country.


Nigeria currently experiences an average of 196 hours of electricity outages per month. This is one of the worst power shortages in Africa. Positively, Nigeria is doubling its power outage capacity from 3 000MW to 6 000MW over the next three years. It was suggested to find a reputable lawyer when setting up your business to overcome many barriers. Investment in Nigeria is for the long run and companies will need to remain realistic and not get caught up in the potential that is within this country. Jan and Mncane stressed the importance of doing research of Nigeria, especially through asking people or companies that have been successful. Companies will need to understand the key role players in their industry and aim to engage with these role players when setting up business. There remains a risk of doing business in Nigeria with many potential pitfalls for investors. Mitigating this risk can be achieved through mergers and acquisitions. Firms will need to consider the following 1) Structure an agreement that will phase in active control to the business, many are locally owned when doing business in the oil and gas industry. 2) Choose the right partner, partnering with the wrong person or entity may result in significant challenges in the future. 3) Adhere to local partnership requirements, both guest speakers emphasised that legal fees are substantial and that all firms should always avoid going to court, thus it is safe to adhere to partnership requirements to avoid any legal battles. 4) Timing and 5) Valuation, this will take time, but firms should allow for adequate time for this.

Automotive Industry in Nigeria Nigeria is beginning to place an increasing emphasis on its automotive sector. It has recently opened a plant and will produce 4X4 SUVS customised for the Nigerian market from April 2014. This is its first “made in Nigeria� car. Hyundai Motor Company who has recently associated with a regional conglomerate, Stallion Group, is said to manufacture Hyundai passenger and commercial vehicles in Nigeria from April 2014. A range of Hyundai passenger models including the i10, i10 Grand, i10 Grand Sedan, ix35 SUV and the Elantra will be assembled in Nigeria by Stallion from April 2014. With regards to the Korean manufacturer’s commercial segment offering, the assembly of models including the Hyundai County Bus and the Mighty Truck has already begun. Innosan is a vehicle brand already made in Nigeria (consortium with Chinese Manufacturers).

Key Points: o o o

In addition, to the demand for an estimated 50 000 new vehicles in 2012, there were approximately 150 000 used vehicles demanded in 2012. According to the National Automotive Council this will rise as the economy grows. Nigeria is making changes to fiscal policies to encourage local production including tariffs on imported SKD vehicles and on tyres. CKD vehicles will have a 0% duty. Speculation in the market place is that this will combat legal freight forwarders but not smugglers.


o o

Smuggling of vehicles to Nigeria is a major concern with porous routes on North and West of Nigeria. Nigeria has recently launched a new automo tive policy to stimulate jobs and technology development.


Discovering Africa The potential in Africa is unlimited; this workshop on Nigeria was the first in the series of workshops that will be hosted by the Durban Automotive Cluster. The following Africa workshop will focus on Kenya and unveil the known and unknown facts of the country and speakers will share their experiences of operating in Kenya. This session is scheduled for May 2014. Additional information will be forwarded to members.

Manufacturing Excellence Programme Information Sharing Session The DAC Manufacturing Excellence Programme held its first quarterly meeting for the year on 23 January 2014 at B&M Analysts. The session comprised of two presentations; the first of which was undertaken by Barry Bredenkam, South African National Energy Development Institute (SANEDI), and the second presenter for the day was Andy Radford, CSIR Biocomposites Centre of Competence.

Tax Incentives for Energy Efficiency Barry Bredenkam provided insight into the new Tax Incentives for Energy Efficiency. The Department of Energy has introduced allowances for energy efficiency savings that will provide tax incentives for energy savings improvements as outlined in regulations for businesses and based on measured and verified energy savings through registrations with SANEDI. This incentive is an amendment to section 12L of the Income Tax Act. Tax incentives are being introduced for businesses that can show measurable energy savings. Section 12L incentives include all energy efficiency projects that reduce energy usage and is claimable until 2020, not only electricity.

Biocomposites in Industry – Managing the supply and demand for predicted growth in SA

As recommended by the DAC executive committee, a presentation on “Biocomposites in Industry – Managing the supply and demand for predicted growth in SA” was given by Andy Radford. The role of biocomposites is becoming increasingly significant for local OEMs and other players in the automotive value chain. The presentation looked at the problem with natural fibre use and solutions and how biocomposites can support the APDP.


Skills Development Programme B-BBEE – Codes of good practice

o Building on capacity and resources to effec tively deliver against supplier development In 2014 the DAC will be focusing on each B-BBEE ele- needs Building an ESD plan ment through a series of workshops taking an in-depth o o Prepare and collect the correct evidence in look at each and the specific implications on firms. order to qualify against the empowering supplier On Thursday, 12 March 2014, the DAC hosted its first requirements workshop in the series and took a closer look at Enterprise and Supplier Development with Dr Robin Woolley, CEO of Transcend Corporate Advisors. As part of quali- The DAC will be looking at the following themes going fying as an empowering supplier, the Revised Codes of forward: Skills Development Good Practice require companies to undertake Suppli- o o Socio-Economic Development er Development with Black Owned Small Suppliers, as Ownership & Management Control well as committing to 12 man-days per annum in de- o veloping EME and QSE suppliers. While organisations have until 30 April 2015 to build a strategic response to the changes, firms need to begin the process of exploring opportunities within and identifying opportunities to develop new relationships or strengthen existing relationships with black owned suppliers in their value chain. This 1-day workshop provided both theoretical and a practical assistance to firms in understanding how to develop their capabilities, focusing on the following areas: o Identifying areas in supply chain in order to source black owned suppliers o Supplier Analysis o Understanding and conducting needs analysis with suppliers to surface development oppor tunity o Collecting the correct supporting evidence for verification audit


Management Development Programme

o the importance of people management, team dynamics and effective communications; o the significance of innovation; The DAC has arranged a Management Development the principles of labour relations; Programme (MDP) for member firms. The first of two o the role and importance of good leadership. week long study school’s was run from 10 - 14 Febru- o ary 2014 at B&M Analysts in Gillitts with 26 delegates under the facilitation of the University of Stellenbosch - Business School. The Management Development Programme (MDP) for the automotive industry aims to equip managers with the necessary competence to not only implement their organisations’ strategic objectives, but to also help them build their skills in managing people. The programme will also assist in developing a basic understanding of the different fields of management to ensure that managers do not perform their own management functions in isolation. The MDP for the automotive industry will provide participants with a broader understanding of leadership and management specifically for the automotive industry and also strives to bring real business benefits to participants and their organisations. After successfully completing this programme, participants will gain a deeper understanding to the automotive sector with relation to: o general management; This programme is presented on the complexity levo the general principles of financial management such as balance sheet, income el of NQF 6. The second study school is scheduled for statement, financial viability, budgets and fi - 12– 16 May 2014. For more information please contact Laurie Coyle-Dowling at laurie@bmanalysts.com or via nancial planning; telephone 031 764 6100. o the core principles of supply chain & opera- tions management; o the principles of marketing and the marketing environment;


Engineering Skills Development Programme The DAC has bolstered the graduate development programme for engineers in 2013 and has provided an external senior engineer (Vanessa Millard) to be the mentor for all the Graduates of the GDP. There are currently six companies participating in the programme (MAHLE Behr, Sumitomo Rubbers SA, Autovest, Brace Able Manufacturing, Commercial Elastic Manufacturers and Federal-Mogul Powertrain Systems). Graduates are currently working through the course content in Module 3: Commercial and Module 4: Human Resources & IR. The programme is a modular based programme and therefore firms wishing to enrol graduates are encouraged to still do so. If your firm has any graduates that they would to enrol in the programme in 2014, kindly contact Laurie Coyle-Dowling (031 764 6100 or laurie@bmanalysts.com).

at NQF level 3. While the cost for participating in the TRACE programme is R14, 000 per person, this cost has been waivered for firms participating in the DAC’s Manufacturing Excellence programme in 2013. If you have missed this valuable opportunity please take note that another session will be run during 2014. If you require additional information regarding TRACE programme, kindly contact Laurie Coyle-Dowling (031 764 6100 or laurie@bmanalysts.com).

Encona Training: VDA 6.3 Module E – Qualification as Process Auditor in the Product Life Cycle

The DAC will be hosting VDA 6.3 training course in KwaZulu-Natal through the well-established Encona Academy. It has been ascertained that this qualification is a specific customer requirement for VWSA suppliers who are required to have an internal auditor. The one week training is designed for firms who want Application-Based Team Leader Skills their internal auditors to achieve the qualification as a Programme certified process auditor VDA 6.3 within the shortest time possible. The contents will include: In the modern manufacturing environment, the role o An introduction to the basics of auditing tech of Team Leaders has increased in importance. As such, niques- general requirements, methods, princi it is important for World Class Manufacturing (WCM) ples and risk analysis; concepts to be successfully introduced and implement- o The basics for process auditors according to ed at this level. The DAC will be offering supervisor and VDA. 6.3; a written and oral exam. team leader training through the B&M Analysts Team A written and oral exam: After passing the Leader Training Programme which is referred to as o exam, participants will receive a VDA certifi TRACE. cate, the card and an entry in the VDA QMC The TRACE skills programme presents both the theodatabase. retical and practical application of fundamental WCM principles and is complemented by leadership and project management training to support a holistic and In South Africa this course is usually only offered in the Eastern Cape, however, the DAC is happy to prescomprehensive skills upgrading programme. The TRACE programme is accredited with MERSETA ent the course in KwaZulu-Natal at a reduced rate for


participating firms. Please note that numbers are limited and therefore bookings will be made on a first come first serve basis. The course will take place on 02 – 06 June 2014 at B&M Analysts’ premises in Gillitts. For additional information, please contact the DAC via email (dac@bmanalysts.com) or call 031 764 6100).

Infrastructure and Materials Programme

Support suppliers to access material inputs at globally competitive pricing Steel Research: The DAC is conducting a research project on the costing of steel as a major input material into the automotive component sector. This research is being conducted as a result of members indicating that these material input costs are making them uncompetitive. The study aims to establish whether or not the following hypotheses are accurate: o Where a small, fragmented demand for certain steel grades is evident, the consolidated demand will allow for negotiation with steel sup pliers. o Based on aggregate grades, the known grades could potentially provide an argument for localisation of steel grades currently unavail- able. This may allow for increased benefit for the value chain through the Automotive Production and Development Plan. o Investigate any opportunity to commonise steel grades going forward. In order for the DAC to effectively evaluate how much steel content is currently used in a vehicle, the DAC has formally received the support and assistance of the OEM Purchasing Council. It is our expectation that this

will improve our successfulness in capturing the full steel volume in local manufacturing. Polypropylene Research: B&M Analysts is currently undertaking a polymer localisation study on behalf of the DAC. The preliminary findings were presented at the DAC Workshop on 03 March 2014. The general objective of the research is to identify opportunities to localise polymer used in the production of automotive components. In this regard, apparent successful localisation of polymer production in Indonesia through the introduction of a local polymer compounder was highlighted as an important reference point, as was the inconclusive research undertaken by the OEM Purchasing Council. The objective of the project is therefore to achieve three outcomes: o To identify key lessons from the polymer localisation activities in Indonesia. o Identify and generate an understanding of polymer localisation opportunities in South Africa; and o Develop a ‘value proposition pack’ specific to investment associated with the identified local isation opportunities. The DAC’s field work indicated that while plastics and polymers are becoming increasingly more important for automotive manufacturers, there remain certain blockages to local production. The initial study undertaken by the DAC has indicated that there is a large scope and opportunity for South Africa to localise polymer production. However, in order for an effective analysis, a much deeper analysis needs to take place.


The DAC hereby proposes that a second phase to the research takes place, in which: o Actual polymer demand is confirmed. o Actual plastics localisation demand is con- firmed. o Better understand Sasol’s capabilities and the investment required to produce automotive polymers and compounds. o Explore opportunities with the dti and the le- vers which can be deployed by government; and o Technical agreements with Indonesia (for ex ample) are explored

Business Retention & Expansion Support Desk The BRE support desk remains available to member firms. If cluster members are experiencing technical specific problems that they require assistance with, they are requested to contact the DAC, identifying the problem as well as how it is affecting the firm. Once the particular problem has been unpacked by the DAC facilitator, it will be referred to the Support Desk at Durban Investment Promotions Agency (DIPA), if necessary. The problem will then be handled by the Support Desk within DIPA with the assistance of a DAC facilitator. The DAC will in turn liaise with the relevant department to assist cluster members (the DAC recommends that each firm appoints a champion for this initiative). Some examples of problems that have been dealt with include: o Labour costs in specific regions. o Health department: Firm a struggling to obtain a permit renewal so that they can continue their catering facilities on site. o Water department: Firm B concerned with quality of water on site. Department observed and confirmed it was in good condition. o Electricity department: Firm experiencing pow er dips. Complaint logged and technical assis tance provided. Please note that this service has been put in place to assist members with problems that they are experiencing, therefore please do not hesitate to make full use of the BRE Support Desk.


for the logistics sector in South Africa. The survey inCarbon Footprint vestigates the relevant trends together with essential At the behest of the Infrastructure TSC, the DAC is business information from various industry sectors. currently providing member firms with FREE Carbon The DAC is very excited to host the launch of this year’s Footprint assessments. The South African Treasury findings as these are expected to highlight critical isintends on implementing a carbon tax in the near fu- sues for industry to take into account in planning both ture, taxing organisations on their specific greenhouse their demand for logistics and production and investgas emissions. It is therefore important for firms to be ment decisions going forward. aware of their current carbon emissions so that they are equipped for the emission taxes. Marguerite Goris, a DAC facilitator has been trained as a ‘Carbon Footprint Analyst’ by Global Carbon Exchange and is providing support to 15 member firms with their carbon assessments at the moment.

Logistics cost mitigation

The DAC conducted an investigation into the outbound logistics costs from Pietermaritzburg for firms. The aim of the study was to identify if there is any room to improve and reduce logistics costs between firms. In order to do this, the DAC collected basic data from firms regarding their outbound logistics. The DAC is currently investigating opportunities to improve costs in the Durban – Gauteng corridor with service providers.

10th State of LogisticsTM survey for South Africa

The DAC together with CSIR and their partners (IMPERIAL logistics, Stellenbosch University, the dti, and Transnet Freight Rail) will be launching the 10th State of Logistics™ survey for South Africa in Durban on 29 May 2014. The State of Logistics™ survey is an annual, independent study presenting directed research and recommendations on South Africa’s logistics sector. Since the publication of the first survey in 2004, the publication has become one of the premier references



DAC Mar_Apr Newsletter