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1 Gauteng s 2011 Automotive Value Proposition AUTOMOTIVE INVESTOR GUIDE GAUTENG

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3 Contents Foreword Executive Summary 1. Introduction 2. Investor Landscape: South Africa and Gauteng 2.1 Political Structures 2.2 Economic Analysis 2.3 The Gauteng Province Gauteng's Value Proposition Gauteng Industrial Policy and IPAP Logistics Overview Support Industries Living in Gauteng 3. The Automotive Sector 3.1 Government Incentive Schemes MIDP and APDP Other Incentives and Funding Schemes 3.2 OEMs in SA and Investments Committed 3.3 Local Supplier Base 3.4 Production Statistics 3.5 Automotive Supplier Park 3.6 Automotive Industry Development Centre 3.7 Business Case Compilation 4. Summary 5. Directory of Contacts 6. Glossary of Terms 7. References The AIDC cannot be held liable for incorrect data that has been quoted. The AIDC expresses its opinion on certain issues and acknowledges that they may change from time to time. This guide is for general use only and AIDC will not be held responsible for misuse or misinterpretation thereof. The AIDC therefore advise that potential investors contact them directly for more details. 1 Gauteng s Automotive Value Proposition 2011

4 Foreword The MEC for Gauteng Economic Development, Ms Qedani Mahlangu If South Africa is the Gateway to Africa, then Gauteng is certainly the province that holds the key to that Gateway. Traditionally, Gauteng is the foundation on which South Africa created its wealth, having been at the forefront of the gold rush in the early 1800s, with Johannesburg eventually becoming known as Egoli, the City of Gold. Gauteng is now the economic powerhouse of Africa, with leading infrastructure in sectors such as information technology, banking, mining and manufacturing. In maintaining its position as the number one province in South Africa, Gauteng has launched the Gauteng Employment Growth and Development Strategy (GEGDS) to further stimulate the local economy. This provincial strategy outlines the growth path of Gauteng from 2009 to 2014, aligning itself with one of the key objectives of the South African government's New Growth Path, which is to create decent work and build a growing, all-inclusive economy. 2 The South African government stated in its New Growth Path strategy that two of its key objectives are to create an additional 5 million decent jobs by 2020 and to lower the official unemployment rate from 25% to 15%. In order to meet these targets, it is estimated that the automotive sector specifically

5 would have to raise economies of scale and production to 1.2 million vehicles by 2020, with an estimated jobs created. The automotive industry in South Africa and indeed throughout the world is driven primarily by the business decisions made by the OEMs (original equipment manufacturers). For South Africa to realise its goal of deepening and widening the automotive industry, major foreign investments in plant and equipment will be required to meet the 1.2 million vehicle production target by The provincial government understands the importance of the automotive sector's contribution to the local economy, skills transfer and especially foreign direct investment. Therefore greater focus will now be placed on making investment in South Africa and the Gauteng province, as easy as possible. Gauteng is the economic " powerhouse of Africa. 3 Gauteng s Automotive Value Proposition 2011

6 Executive Summary Blue IQ Group CEO, Ms Amanda Nair The Minister of Trade and Industry, Dr. Rob Davies, stated in his budget vote speech to the National Assembly in May 2010 that investment promotion - both domestic and foreign - will be prioritised. In addition to our current trading partners such as the European Union, Americas and Japan, other destinations like the BRIC countries (Brazil, Russia, India and China) and the Middle East will be targeted as potential sources of foreign direct investment (FDI). The Minister made special mention of the government's Expanded Public Works Programme (EPWP), which translates to an investment pipeline of R115 billion of projects over the next three years. These investments (local or foreign) will need to be handled efficiently. "In turn, these projects will be serviced through a one stop facilitation centre, offering a single integrated project team approach," said the Minister. The Minister's words echo those of other political leaders, that South Africa is alive with opportunities. They further echo MEC Mahlangu's appeal for the efficient handling of FDI enquiries and the need for more enquiries to be converted into real investment. The Gauteng Department of Economic Development will therefore be focusing on FDI enquiries in the province and how best to handle them for all sectors of the economy. 4

7 Blue IQ, an agency of the Gauteng Department of Economic Development, through its two automotive specific subsidiaries, the Automotive Industry Development Centre (AIDC) and the Automotive Supplier Park (ASP), provide support to the automotive industry. We look forward to making your investment in South Africa and Gauteng a pleasant and rewarding experience. Blue IQ welcomes you to Gauteng; the Smart Province. One of the AIDC's functions is to facilitate automotive investment enquiries. During recent interactions with several automotive suppliers that have considered setting up manufacturing facilities in Gauteng, suppliers have spoken of the difficulties experienced in gathering basic information on the automotive manufacturing sector in Gauteng. They also indicated that a further challenge was communicating with various tiers of government and their subsidiaries to understand the incentives offered to foreign companies interested in selecting Gauteng for their operations. After further investigation, a clear need emerged to consolidate all the information requirements of a typical investor into a combined offering. The Gauteng Department of Economic Development, having been made aware of this hurdle, have tasked the AIDC with developing a value proposition aimed to facilitate and fast track investor enquiries by providing key information and contact details as well as to promote Gauteng as the destination of choice for potential investors. A clear need emerged to consolidate all the information requirements of a typical investor " into a combined offering. This guide aims to do just that and we hope it will be of great value in assisting the potential investor to navigate the South African automotive landscape. This is by no means an independent effort or the replacement of the Department of Trade and Industry (DTI) as the partner for foreign direct investors. Instead, the AIDC and this document serve to support investment enquiries specifically in the automotive sector and those interested in the Gauteng region as a preferred destination. 3 5 Gauteng s Automotive Value Proposition 2011

8 1. Introduction At a German business dinner hosted by BMW South Africa in February 2011, the Governor of the South African Reserve Bank, Gill Marcus, stated: "Investments in the automotive industry have supported the domestic economic recovery and include a number of significant projects that are related to recent export contracts being secured by local assembly plants. South Africa is making a name for itself as a low-volume, high-quality niche car supplier and local companies have distinguished themselves internationally by exporting more advanced automotive products than most other centres in major competing countries. More investments are expected to flow into the automotive industry and the components producers, and this augurs well for the broader manufacturing industry outlook." International conglomerates, automotive and other, are looking at South Africa as a new market, as well as the base for expanding into other Sub- Saharan African markets. These types of multinationals have shown great confidence in South Africa as a credible investment destination. The Minister of Trade and Industry, Dr Rob Davies, in his address at NAACAM's Annual General Meeting and Conference held in October 2010, stated that government viewed sub-saharan Africa's combined population of some 800 million people as an untapped market with huge opportunity for future growth (NAACAM is the industry representative body of the South African automotive components industry). He encouraged the automotive sector to capitalise on it. Along with the country's drive to turn the tide of the recent worldwide recession, this has seen South Africa grow in interest as an investment destination. 6 Furthermore, the country has a significant social challenge with its unemployment rate stubbornly remaining around the 25% mark. The creation of work opportunities for the eradication of poverty and unemployment is therefore a key priority for the government. This is reflected at the highest levels in the government's strategic plans such as The New Growth Path as well as the Industrial Policy Action Plan.

9 Combating such challenges requires considerable stimulation of the economy. One of the various actions required is the attraction of foreign direct investment (FDI). FDI can be defined as an investment made by a resident of one economy in another economy and it is of a long-term nature or of lasting interest, according to the UNCTAD (United Nations Conference on Trade and Development: Division on Investment and Enterprise). FDI can be used as a tool for stimulating and accelerating economic growth. When successfully implemented, FDI has a snowball effect with an end result of reinforcing a country's credibility as a solid investment opportunity. Government is therefore placing much greater emphasis on attracting largescale foreign investment and creating an enabling environment for local and foreign businesses. The starting point for the attraction of FDI is understanding the inherent value proposition of this region. This guide is designed to market South Africa as an investment destination, with a special focus on Gauteng and its automotive industry. It aims to generate significant interest so that FDI leads may be taken to the next phase where a comprehensive business case will then be required. The guide also provides key contact information for assistance in obtaining the necessary inputs for the compilation of a feasibility study and ultimately a business plan. International conglomerates, automotive and other, are looking at South Africa as a new market and the base for expanding into other " sub-saharan African markets. 7 Gauteng s Automotive Value Proposition 2011

10 2. Investor Landscape: South Africa and Gauteng South Africa is widely known as the Rainbow Nation after successfully managing to maintain peace and promoting unity in diversity, during its transition from a country in a state of emergency to that of a fledgling democracy. At 17 years old, like most other young democracies, its diverse people are still in the process of healing the wounds of its turbulent past. South Africans can proudly say that they are now focused on developing an all inclusive economy with the broad goals of poverty alleviation, equitable wealth distribution and the creation of meaningful employment. From an investor perspective, it is important to note that the new democratic structures of government are focused on attracting higher levels of foreign investment to grow the economy, as well as to make investing in South Africa as easy as possible. 2.1 Political Structure The political structure is a federal system of government, comprising national, provincial and local governments. The national government or Parliament is further broken down into the National Assembly and the National Council of Provinces. The National Assembly, in which the majority of seats are held by the ruling political party, is the body that elects the nation's president. The people of the country do not directly elect the president, as is the case in some other democracies. South Africans therefore vote for a political party of their choice, not directly for a political personality. The African National Congress (ANC) has won every election since the first democratic vote in The current President of South Africa, Mr Jacob Zuma, is also the leader of the ANC. 8

11 The National Executive team or Cabinet comprises the President, the Deputy President as well as the Ministers of the various departments. They are held accountable by the Parliament for delivering the mandate of the people. The key government departments responsible for facilitation of foreign direct investment are the Department of Economic Development and the Department of Trade and Industry. The Ministers responsible for these departments are Minister Patel and Minister Davies, respectively. The Gauteng economy is therefore keen to attract investment partners to the automotive sector who are also capable of providing clean automotive technologies such as electric, gas and bio-fuel powered vehicles. There is huge untapped potential in this sector. The Gauteng region has additional regional entities that have been created to support the local economy. They all fall under the portfolio of the MEC for Economic Development. They are also the Ministers responsible for South Africa's key national action plans, the New Growth Path and the Industrial Policy Action Plan (IPAP2). These plans are aimed at stimulating economic growth and consequently job creation. Attracting foreign direct investment is crucial in achieving the goals of these plans. The Provincial and Local governments also have regional entities to ensure that these national action plans are cascaded right through the structures until they are implemented meaningfully at grass roots level. In the Gauteng region, Premier Nomvula Mokonyane leads the executive committee that drives these local initiatives. The member of the executive committee responsible specifically for Economic Development is MEC Qedani Mahlangu. In line with the key national action plans, the Gauteng region has also developed its own local action plan known as the Gauteng Employment Growth and Development Strategy, or GEGDS. The key objective is the creation of work by building a growing and inclusive economy. Of interest to the automotive investor, are the programme's initiatives to make the economy more innovative and efficient (which is conducive to investment), as well as to start "greening" the economy (which shows environmental responsibility, efficient energy usage and a drive to reduce its carbon footprint). Those that are of relevance to the automotive investor are the Gauteng Economic Development Agency (GEDA), The Blue IQ Investment Holdings and Gauteng Enterprise Propeller (GEP). Respectively, they are responsible for promoting and growing the Gauteng economy at large; investing in strategic infrastructure for identified sectors and the development and support of local enterprises (Small Micro Medium Enterprises). The Automotive Industry Development Centre (AIDC) is a subsidiary of Blue IQ Investment Holdings. The AIDC s mission is to serve the South African automotive industry, government departments and government agencies to: Grow the Gauteng province, specifically and the global competitiveness of its automotive industry; Support the government's industrial development related objectives; and Contribute to government and Industry's goals of continuous growth and sustainable job creation and skills development. The Gauteng region has a strategy for developing a high tech environment to bolster the automotive industry and it can be widely seen how government's strategy is developed into local structures to support that strategy. 9 Gauteng s Automotive Value Proposition 2011

12 2.2 Economic Analysis The South African economy can be described as mixed capitalism. It is predominantly a free market, but with the government playing a significant role in directing economic policy with the aim of poverty alleviation and equitable distribution of income and wealth. One of the key issues for any investor is stability, both in terms of stability of pricing and financial systems. The South African government realises this and has made the South African Reserve Bank's primary goal the achievement and maintenance of financial stability. As such, the Reserve Bank has established a Financial Stability Committee dedicated to monitoring, assessing and intervening in matters of macro-economic stability. In the aftermath of this crisis, leading world economies like the USA, the European Union and Japan, are all experiencing some type of financial woe or recession. Economic stimulus and bailout packages are well known terms in these markets. Even the emerging markets, characterised by the BRIC countries, have seen a slowing down in their aggressive expansion and growth paths. In a recent co-publication of The World Bank and the International Finance Corporation, Doing Business 2011, South Africa faired extremely well as an investment destination in relation to other developing countries. In the overall ranking, South Africa was ranked the 34 th best country (out of 183 economies surveyed) in terms of ease of doing business, as shown in Graph 1 below. In assessing South Africa's financial stability, one need not look further than how it fared in the recent 2008/2009 world economic crisis, arguably the worst the world has seen. Singapore Ease of Doing Business - Global Ranking 1 South Africa, despite its open policy economy and heavy reliance on the Mauritius 20 economic states of its major trading partners (like the USA, EU, Japan and South Africa 34 China) did not experience the severe meltdown that we saw in the leading economies, especially in the finance and banking sectors, where the world's economic woes actually started. Financial instability generally first manifests itself in banking failures, second through intense asset-price volatility and third, in a collapse of market liquidity. Botswana Namibia Kenya Nigeria In fact, the well regulated nature of the South African banking sector had seen the effect minimised to a slowdown in business, rather than critical failure. This is a tribute to the country's well-regulated and liquid capital markets and its sound legal and commercial institutions, which provide a certainty that is the bedrock of investment Rank Graph 1: Ease of Doing Business Source: Doing Business 2011: Making a Difference for Entrepreneurs 10

13 More importantly, South Africa was rated 10 th in the category for protection of investors, as shown in Graph 2 below: Protecting Investors - Global Ranking South Africa has been through a growth cycle that started in 2003 at 3.1% and peaked in 2006 and 2007at 5.6%. It was also during this period that the South African automotive market experienced some of its best growth, peaking at vehicles sold in New Zealand South Africa Mauritius Botswana The negative growth recorded of -1.8% in 2009 is directly attributed to the global economic recession. South Africa is reliant on the economic state of its current major trading partners (USA, EU, Japan and China) and as a result, the export sector suffered under subdued demand for South African goods. Nigeria 59 Namibia 74 Kenya Rank Graph 2: Protecting Investors Source: Doing Business 2011: Making a Difference for Entrepreneurs Amongst the emerging markets, characterised by high growth rates, these rankings show South Africa as one of the best destinations in which to invest. To further understand the state of the South African economy, some key economic indicators are listed below, showing their current values, as well as estimated future projections. a. Economic Growth and Stability % Growth in GDP Table 1: GDP Data Source: Investec Economic Forecast Q *2010 to 2015 figures are estimates To mitigate this risk, South Africa is now expanding trade with other markets, with a focus on the BRIC countries. In fact, South Africa has now been invited by China to join the BRIC nations, to form BRIC-SA. This affirms South Africa's role in the world economy and will help boost trade and investment, especially in these new markets. It is best summed up in the words of Mr Miller Matola, the International Monetary Fund (IMF) Chief Executive: "To draw South Africa into this powerful club underlines the country's growing international role and its future significance for those who want to make use of the expanding African opportunities". Having said that, the recovery has been remarkable, with estimated average GDP for 2010 of 2.8% (Investec GDP Q release). This is a positive 4.6% change from the negative 1.8% contraction shown in Forecasts for growth show a steady upswing from the 2009 low, peaking at 4.8% in South Africa's forecasted GDP growth for 2011 (3.6%) and 2012 (4.3%) is higher than the forecasted United Nations world gross product for 2011 (3.1%) and 2012 (3.5%). The automotive sector did see a rise in demand, especially in the export business, as a result of improved demand conditions in certain export markets. Export sales for 2010, as recorded by NAAMSA, showed a dramatic jump of 36.9% compared to the 2009 figure. Total aggregate vehicle sales recorded for 2010 of units, were up by 24.7% from total 2009 sales of units. 11 Gauteng s Automotive Value Proposition 2011

14 The mining sector, despite the strong Rand, has seen good recovery. This has been led by strong demand for commodities such as platinum and gold (part of the Platinum Group of Metals - PGM), which are at an all time pricing high. It is expected that going forward, there will be an even higher demand for South African-mined PGM used in emission reduction components like catalytic convertors, as countries strive to meet lower CO 2 emissions. South Africa is the largest producer of platinum in the world. In terms of the provincial contribution to the South African economy (GDP), Gauteng is still the leading province, as shown in Graph 3 below. Gauteng contributed 33.9% of South Africa's total GDP and is estimated to contribute around 10% of Africa's GDP. Gauteng's economy is greater than any other country in SADC (Southern Africa Development Community) and is the fourth largest in Africa. Provincial Contribution to GDP 2009 Gauteng is also considered the financial capital of Africa: more than 70 foreign banks have their head offices in the province, and at least that number of South African banks, stockbrokers and insurance giants. The Johannesburg Stock Exchange (JSE) in Johannesburg is the 17 th largest stock exchange in the world by market capitalisation. Gauteng comes second only to Western Cape in terms of GDP growth. Graph 4 below shows the average growth rate for period 2002 to 2009 for the nine provinces. Average Growth Western Cape 4.3 Gauteng 4.0 KwaZulu Natal 3.8 Eastern Cape 3.4 Gauteng 33.9 North West 3.1 KwaZulu Natal 16.1 Mpumalanga 3.0 Western Cape 14.0 Free State 2.9 Eastern Cape 7.6 Limpopo 2.8 Mpumalanga 7.1 Northern Cape 2.6 Limpopo North West 6.5 % GDP Free State 5.5 Northern Cape % Contribution Graph 3: Provincial Contributions to GDP Source: Stats SA Average Growth SA Average 3.7% Graph 4: Average GDP growth rates for Source: Stats SA Gauteng's regional GDP growth of 4.0% was higher than the South African national growth of 3.7%. 12

15 Gauteng % Contribution by Economic Sector In analysing the job absorption potential of each economic sector, it can be seen from the pie chart below that the greatest potential lies in the manufacturing, trade, finance and community services sectors. KwaZulu Natal Western Cape Eastern Cape Mpumalanga Free State Construction 8.0% Transport 6% Mining 2.3% Utilities 0.5% Trade 22.1% North West Limpopo Northern Cape Private Households 9.1% % Contribution Community & Social Services Trade Finance Manufacturing Graph 5: Contribution by Economic Sector Source: Stats SA In terms of the key economic sector of manufacturing, including the automotive industry and the finance sector (on which the automotive sector relies), Gauteng is once again the major contributor, contributing about 40% to each sector. Gauteng also dominates the trade and community services sectors. b. Labour The unemployment rate is defined as the number of jobless people as a percentage of the total labour force. In South Africa the average unemployment rate is estimated at 25.3% as of It is well known that South Africa has one of the highest unemployment rates in the world. The socio-economic ramifications are severe and therefore job creation is a high priority for the South African government. Finance 12.8% Manufacturing (including Automotive) 13.4% Pie Chart 1: Employment split by Economic Sector Source: Investec Community & Social Services 20.8% The Gauteng region is the highest GDP contributor in these sectors. It also comprises the largest part of the South African population, approximately 22.4% (11.1 million of South Africa's total population of million). Approximately people (in the first half of 2010) migrated into Gauteng from other regions, primarily seeking employment. With a population density of approximately 614 people per square kilometre, Gauteng offers investors a diverse pool of labour, as well as the greatest proportion of professionals, technical personnel and executives than any other province in South Africa. 13 Gauteng s Automotive Value Proposition 2011

16 It can therefore be expected that the Gauteng economy will be required to absorb the highest proportion of the national job creation targets. This further means that much of the economic stimuli will be focused on the Gauteng region. % CPI Inflation % PPI Inflation The Gauteng automotive sector will benefit from this increased focus. Recent examples of collaborative initiatives between Ford Motor Company of Southern Africa (FMCSA) and the Gauteng provincial government's Department of Economic Development are: The first automotive sector BBBEE Supplier Incubation Facility aimed at developing Black empowered entrepreneurs; and A Production Simulator Facility which will be used by FMCSA in its production initiatives. The facility will be used by engineering students from various Education and Training Institutions, to further enhance the technical capabilities residing within the Gauteng province. Table 2: Average CPI/PPI Data Source: Investec Economic Forecast Q *2010 to 2015 figures are estimates Inflation in 2007 had moved out of the 3% to 6% target zone. The Reserve Bank had instituted several interest rate hikes, to help curb the rising rate. Despite severe criticism, this seems to have achieved the desired effect. In the fourth quarter of 2009, the CPI inflation had once again entered the 3% to 6% target zone. In 2010, there was a steady decline in the inflation rate, with the year's average of 4.2% almost at the centre of the target range. At the launch of these initiatives, FMCSA expressed its long term commitment to the South African and Gauteng automotive industry. It intends to transform its Gauteng assembly plant into an export base, producing some units a year, exported to over 100 destinations worldwide. FMCSA is confident that Gauteng's highly skilled labour, as well as world class infrastructure, can support this strategy. This investment impact is estimated at R79 billion over 15 years and is expected to contribute approximately direct and indirect jobs in all tiers of the industry over this 15 year period. c. Inflation Rates In South Africa, the Consumer Price Index (CPI) is used as a measure of the inflation rate. It consists of a basket of goods and services purchased by an average consumer. Often, CPI is quoted without the effect of mortgage bond rates. It is then known as CPIX. 14 The CPI inflation rate now seems to be under control and projections for the next five years show it to be within the target range of 3% to 6%. This gives the South African Reserve Bank an opportunity to focus on economic stability and growth stimulation. Producer Price Inflation (PPI) also shows a trend of declining from a high base of about 14% in Much of the increase in PPI can be attributed to the increase in utility costs and especially electricity costs. Eskom, the country's electricity provider, is implementing huge infrastructure expenditure to increase capacity for the growing economy, as well as to maintain current plant and equipment. The forecasted lowering and stabilisation of CPI and PPI means that the manufacturing sector can control price increases better. Combined with interest rate cuts, this means that the average consumer, while recovering from the recession, will have a bit more purchasing power, as well as access to more competitively priced goods.

17 For the local automotive industry, more disposable income and the improvement in consumer sentiment means a gradual recovery in sales. Improved PPI also means that automotive exports become more profitable. The Gauteng province has consistently recorded the lowest CPI rate since 2007 (7.0%), 2008 (11.3%) and 2009 (6.9%). The national CPI recorded in these periods were 2007 (7.1%), 2008 (11.5%) and 2009 (7.1%). d. Interest Rate % Repo Rate % Prime Overdraft Rate Table 3: Repo/Prime Rate Data Source: Investec Economic Forecast Q *2010 to 2015 figures are estimates The South African Reserve Bank uses the repo rate (the rate at which it lends money to the commercial banks) as a tool to control inflation. Interest rates have shown a steady decline, coming off a 2008 high of 11.5% (repo) to a low of 5.5% in The forecasted rates of 6% to 7% are still high in comparison to leading economies. These high interest rates, as well as the financial instability and the lacklustre recovery of the leading economies, are making emerging markets like South Africa an attractive destination for international investors. In addition, South Africa and other emerging market economies have an economic weapon few advanced economies have: the flexibility and scope to significantly lower interest rates. This proved very useful during the recent economic downturn, where South Africa was able to lower the repo rate by some 5 basis points between 2008 and 2010, which acted as a great stimulus in gearing the economy quickly out of the recession and helped to swing the GDP rate from -1.7% in 2009 to +2.8% in None of the first world economies were able to achieve this. e. Exchange Rates The South African Rand (ZAR), like most other emerging markets, has weakened against the US$ since It really only gained considerable strength against the US$ during the later part of This coincides with the worldwide recession and the consequent collapse in the strength of the leading economies, attributing the relative gains in the Rand to the weakening of the US$ rather than the actual increasing of the strength of the Rand. There is therefore an expectation that the Rand will also gradually weaken, as the world economies start to emerge out of the recession. This trend is reflected in the table below. Exchange Rate US$/ZAR GBP/ZAR EUR/ZAR ZAR/JPY Table 4: Exchange Rate Data Source: Investec Economic Forecast Q *2010 to 2015 figures are estimates As much as the Rand's strength is good for countering the negative inflationary effects of increasing world prices of imported commodities (e.g. crude oil), the South African government is acutely aware of the negative effect on exports from South Africa, especially in the automotive, manufacturing and mining sectors. 15 Gauteng s Automotive Value Proposition 2011

18 As such, there are discussions on how to stabilise the Rand, as well as to determine its optimal level of trading. Some economists believe that South Africa should protect the economy by directly regulating the exchange rates and some believe that this is not a sustainable solution. The Reserve Bank is also trying to quell the Rand's strength with the various mechanisms it has within its control. One strategy for investors to protect themselves from currency fluctuations is to negotiate with South African companies that the sales prices are fixed in some hard currency. In that way, the buyer will have a stable buying price in hard currency, say US$ or Euro, while the seller takes the risks and benefits of currency fluctuation, within an agreed reasonable range of fluctuation. It offers investors a diverse pool of labour with a greater proportion of professionals, technical personnel and executives than any other province and is poised to support the key industries of manufacturing, financial and business services and logistics. Gauteng is therefore home to hundreds of leading local and multinational companies. Of the seven key automotive OEMs involved in local assembly, Gauteng hosts three: BMW SA, Ford Motor Company SA and Nissan/Renault SA. Mercedes Benz SA, VW SA, General Motors SA and Toyota SA also have representation in Gauteng either in terms of head offices or major vehicle distribution centres. In the automotive industry such arrangements are possible, where foreign exchange adjustments are granted on a quarterly or bi-annual basis. It is common practise for OEMs to have such pricing agreements with their local suppliers. Geographically, Gauteng is the smallest of the nine provinces, yet it comprises the largest share of the South African population: approximately million people. Stats SA currently estimates the total South African population to be 49.9 million, of which 22.4% live in Gauteng. It therefore has the highest population density of approximately 614 people per square kilometre. This is partly due to the migration of people from other provinces and neighbouring countries seeking work and opportunities, which further enhances Gauteng's reputation as a place of opportunity and prosperity The Gauteng Province GAUTENG West Rand Carletonville Vereeniging Muldersdrift Krugersdorp City of Tshwane Johannesburg Ekurhuleni Boksburg GAUTENG Vanderbijlpark Soweto Roodepoort Pretoria Centurion Midrand Sandton Randburg Sedibeng Vereeniging Cullinan Bronkhorstpruit Metsweding JHB Int. Airport Bedfordview Benoni Springs Heidelberg The Gauteng province consists of 12 municipalities. The three major metropolitan cities are Johannesburg (the largest city in southern Africa), the City of Tshwane (Pretoria) and the metropolitan council of Ekurhuleni (formerly East Rand). Ekurhuleni is considered the manufacturing hub of Gauteng and houses some of the major first tier automotive suppliers.

19 2.3.1 Gauteng's Value Proposition Ease of doing business World Class Financial & Banking Systems State of the art ICT Outstanding Business Services (Conference Venues, etc) World-leading training institutes Access to raw materials Established Road, Rail & Air infrastructure (30 airports) Low cost electricity High standard of living Home to hundreds of multinationals Gauteng s economy is 4th largest in Africa City Deep Container Terminal Home to the largest cluster of OEM Assemblers (3 of 7) Excellent freight & logistics services Business Capital of Africa Gauteng is the gateway to sub-saharan Africa Variety of tourist attractions Home to 164 component suppliers Research & Development Support (CSIR, The Innovation Hub, TIA) Gauteng Automotive Strategy National Government Support (DTI, DED, DOL, DS&T) Gauteng Government Support (GEDA, GEP, Blue IQ) MIDP/APDP Automotive Incentive Programme Automotive Industry Development Centre World class Automotive Supplier Park Gauteng Industrial Policy Politically & Economically stable Largest portion of skilled workforce in SA 17 Gauteng s Automotive Value Proposition 2011

20 2.3.2 Gauteng Industrial Policy and Industrial Policy Action Plan (IPAP) Gauteng's contribution to the national economy is significant enough to justify having its own regional industrial policy. The Gauteng Department of Economic Development (DED) has therefore embarked on the development of an Industrial Policy (IP) for the province. It will align itself to broad goals of the national industrial policy (developed and implemented by the Department of Trade and Industry) which are to build, deepen and diversify the industrial base. Specifically, it will seek alignment with the four main pillars of the national Industrial Policy Action Plan (IPAP2) which are: 1. Industrial financing - the formation of proposals that will enhance access to industrial financing for investment in productive sectors. 2. Leveraging procurement - to maximise effectiveness of local procurement processes and supplier development. 3. Development of trade policies - to regulate and plan trade that is most beneficial to the country. 4. Competition policy - to address the low levels of national competition and remove monopolies. The key action programmes as outlined in IPAP2 in specific regard to the automotive industry are: 1. Automotive Production and Development Programme (APDP) Nature of the intervention: Regulatory amendments and implementation of the tariff regime, production incentive and volume assembly allowance elements of the APDP. 2. Identification of opportunities to broaden and deepen automotive component manufacturing Nature of the intervention: An OEM-led strategy for further localisation of technologically advanced suppliers of identified products in five key sub-sectors such as electronics, body parts, interiors, exteriors and chassis and drive-train Competitiveness Improvement of Automotive Component Manufacturers (CIACM) Nature of the intervention: Firm level manufacturing competitiveness improvement through benchmarking, gap identification and assistance to close competitiveness gaps by engineers/advisors and post intervention assessment. 4. Enterprise Reference Architecture (ERA) portal for SME suppliers Nature of the intervention: Portal to help firms optimise existing technology investments through best practices. 5. Mentorship of SME component manufacturers Nature of the intervention: This project will involve the facilitation of learning for component manufacturers, especially third and fourth tier suppliers through the provision of mentors over a specified, short period of time according to pre-determined guidelines. 6. Medium and Heavy Commercial Vehicle (MHCV) Development Action Plan Nature of the intervention: Completion of a study to identify opportunities and interventions to resuscitate the MHCV sector. 7. Commercialise South Africa's first electric car (the Joule) Nature of the intervention: Provision of appropriate support to encourage local manufacture of electric vehicles and related components, installation of infrastructure for such electric vehicles, creation of testing facilities, provision of demand stimulation mechanisms and public education on the use and benefits of alternative energy source vehicles. The Gauteng Industrial Policy will focus on the role of provincial government and how best to direct efforts in growing the regional industrial sector. Specific action plans for the automotive subsector will echo that of the national plan as shown above Logistics Overview The term "all roads lead to Gauteng" springs to mind when viewing the road infrastructure map below. This has much to do with the historical development of Gauteng as the centre of all major economic activity.

21 South Africa boasts world class road infrastructure with a network of approximately km. The road network links major cities, towns, villages and rural areas in a way that resembles that of established first world countries, rather than comparative emerging economies. Gauteng's total road network is approximately km in length. Municipal urban roads comprise about km, rural access roads about km and national roads about km. Gauteng is therefore predominantly urban and industrial. South Africa also has established road networks that connect it to the rest of Africa. They pass through SADC (Southern African Development Countries) regions with which South Africa has preferential trade agreements. Some key infrastructure information is shown below, courtesy of GEDA's Gauteng Economic Opportunity Atlas. The national roads link Gauteng for quick access to other provinces, especially the coastal provinces with their port infrastructure. Vehicles and components manufactured in Gauteng are exported via the ports of Cape Town (2 000 km), Port Elizabeth (1 075 km), East London (980 km), Durban and Maputo (600 km). N1 Wonderboom N14 N4 Westonaria Lanseria Krugersdorp Randfontein Johannesburg Pretoria Rayton Grand Central OR Tambo Int. Kempton Park Rand Germiston Boksburg Swartkop Waterkloof N17 Bronkhorstpruit N12 N4 Port of Maputo (600 km) N National Roads Airports Rail Sea Port N12 Carletonville N1 Meyerton Vereeniging Vanderbijlpark Heidelberg N3 Port of Cape Town (2 000 km) Port of Port Elizabeth (1 075 km) Port of East London (980 km) Port of Durban (600 km) 19 Gauteng s Automotive Value Proposition 2011

22 Gauteng is also home to the City Deep logistics hub which is part of its comprehensive rail network. This terminal is the premier container depot in South Africa, the largest inland port in Africa and fifth-largest in the world. As a landlocked province located 600 km from the nearest port, Gauteng saw the need for developing strategic infrastructure like City Deep. The hub supports the local business need for an effective transport and logistics platform for containers, particularly for the major export of goods into sub- Saharan Africa. The latest addition to Gauteng's rail infrastructure is the Gautrain passenger rail network. Its purpose is to alleviate road traffic congestion in a high-traffic corridor by creating a viable alternative for business people who currently travel by car. Gautrain connects the two major cities of Johannesburg and Tshwane with the OR Tambo International Airport which is situated in the metropolitan council of Ekurhuleni. OR Tambo International Airport is one of the 30 airports in Gauteng. With its recent upgrade, it is now considered one of the most effective airports in the world. It proved itself during the FIFA 2010 Soccer World Cup, when it handled hundreds of thousands of international visitors' arrivals, domestic travel and departures. The other airports of importance are the Lanseria and Wonderboom airports, which primarily handle air cargo in the cities of Johannesburg and Pretoria respectively. Rand airport is a smaller airport, primarily for private chartered flights. Automotive goods that are not exported via sea freight, such as sewn leather seat covers or parts required within short lead times, will be routed through at least one of these airports. Investors in Gauteng are therefore guaranteed easy access to major markets in African economies, the Pacific Rim, Latin America and East Asia through the Atlantic and Indian Ocean Support Industries The South African automotive industry does not operate in isolation. South Africa is a country that is rich in natural resources. As such, the automotive industry has strong linkages with other input industries. The majority of base metals used in vehicle construction such as aluminium, copper, steel, chrome and nickel are mined locally in Gauteng. South Africa is also the largest producer of platinum, rhodium and palladium known as the Platinum Group of Metals (PGM). Much of South Africa's competitive edge is based on the abundance of raw materials in the country and the development of the beneficiation industries around them. Similarly, the agricultural industry supports the production of automotivequality leather. One of the major exports is sewn leather seat covers. There is also a well developed textile industry that can supply automotive-quality cloth. There are also a host of service industries such as engineering, electronics, machinery, equipment, tooling, chemicals, plastics and others such as logistics, financial, wholesale, retail and advertising. More detail on the industry subsectors in Gauteng may be found by referring to the Gauteng Department of Economic Development and GEDA websites listed in the directory Living in Gauteng South Africa enjoys probably the best weather in the world, with a predominantly mild climate. Gauteng, which is part of the Highveld region, has typical summer temperatures on average between 12 to 30 0 C. Winter temperatures range on average between 3 and 20 0 C. 20

23 The rainy season is between November and February, with Gauteng famous for its Highveld storms: convenient rain, occurring in the afternoons for an hour or two, then clearing nicely, followed by beautiful sunny days. Gauteng is situated inland, approximately six hours away from the nearest coastal region. The national routes linking the inland to the coast make for a pleasant and scenic drive for a quick weekend getaway. One need only drive an hour away from Gauteng to enjoy a day in the Dinokeng Game Reserve, home to the Big Five. The internationally recognised Kruger National Park is a mere five hours away. Depending on one's preference, Gauteng offers gourmet restaurants to cater for a broad variety of " international tastes. Apart from the excellent weather and natural beauty of the country, an expatriate living in Gauteng for business reasons will find that it offers all the conveniences of any first world country. There is access to affordable housing, with many current expatriates choosing to live in one of the many golf estates. These offer a secure lifestyle with all conveniences situated in one place such as private schools, sporting facilities and sometimes mini shopping centres. South Africa is known for accommodating new sub cultures into its Rainbow Nation, with German and Japanese OEM expatriates enjoying access to their own schools and social clubs. University education is equally accessible to expatriates, with Gauteng boasting world renowned tertiary institutes such as University of South Africa (the largest distance learning university in the world), University of Witwatersrand, University of Johannesburg and University of Pretoria, amongst others. Their world class faculties and facilities support Gauteng in building a knowledge economy. The province supports a very active social life. Depending on one's preference, Gauteng offers gourmet restaurants to cater for a broad variety of international tastes, vibrant night clubs, cinema houses, zoos, parks and much more.many expatriates have chosen to make South Africa their permanent home. 21 Gauteng s Automotive Value Proposition 2011

24 22 3. The Automotive Sector The first motor vehicle, the Benz Velo, made its appearance in South Africa in Gauteng's reputation as a central geographical area began at the unveiling of the vehicle, which took place in Pretoria, Gauteng. The dreams of a horse-less carriage had become a reality and it transformed the South African environment as it did the world over. Since then, the automotive industry proved itself to be dynamic and fickle. Those countries that could not keep up with an ever changing environment, driven by new technological development and economic competiveness, did not last long as manufacturing hubs and are all but forgotten. This cycle continues today. Even the traditional automotive leaders (USA, European Union and Japan), where the modern automotive industry has its roots, have to compete fiercely with the new emerging economies characterised by low production costs and high new market potential. Traditionally, they were able to out-engineer competitor countries, with their strength as leaders in the high-tech environment. But even that has been eroded, particularly in the East, where complete design, development and production of vehicles is taking place. South Africa has developed its own electric car, the Joule, which is now in the process of being commercialised for mass production. The South African Department of Trade and Industry contributed some R35 million to the development of this vehicle. The globalisation of the motor industry is thus no longer focused on traditional markets. Much of the vehicle production has been transplanted to the markets they serve, for both political and economic reasons. This has been the case with the South African automotive industry. Much of recent government policy has focused on converting the market from one based only on small scale local consumption to that of large scale manufacturing and exports. As the leading economies move away from the trend of exporting fully built up vehicles (partly due to very high logistics costs), countries like South Africa are becoming the new transnational regional hubs for assemblers.

25 South Africa is also positioned to serve more than one export market. As much as it is primed for becoming the gateway to the yet untapped African market, it also serves various first world markets. The USA and European Union are the largest consumers of South African built cars and components. Vehicles exported into these regions enjoy preferential import duty rates under the AGOA (African Growth and Opportunities Act, a duty free agreement with the USA) and EU (European Union) trade agreements. Apart from being ready, as a transnational regional hub for assemblers, the automotive industry has reached a level of maturity, with Gauteng being the most mature. 3.1 Government Incentive Schemes It is clear that the South African government has seen the automotive industry as a strategic industry in the economy. As such, they have and continue to deliver a policy framework that is aimed at making South Africa an attractive destination for the manufacture and export of motor vehicles to Africa and the rest of the world. This policy is known as the Motor Industry Development Programme (MIDP) and its successor the Automotive Production and Development Programme (APDP). They are discussed further below MIDP and APDP The MIDP was introduced in 1995 and much of the growth and success of the automotive industry is attributed to its successful implementation and continuation. These were not the first programmes that were implemented to grow the industry. Previous programmes were implemented prior to1994, when the South African economy was largely limited by international sanctions. The core principles of these programmes were thus primarily centred on protectionism and focused on achieving high local content. They also imposed high import duties on imported cars and components. The positive result of this strategy was that it gave birth to the local vehicle assembly industry and the formation of a local supply base to support it. The negative consequences were a local industry with low production volumes, diverse model ranges and high vehicle prices. Local suppliers had also become uncompetitive compared to their global counterparts, basing local component viability decisions more on landed costs rather than actual production costs. The MIDP was designed to rectify these issues, by fundamentally changing the focus from import protectionism to export competitiveness. The export focus would open the market up to global opportunities as well as threats. The global opportunities would allow South African assemblers the chance to compete for high volume global supply of selected models and components. These high volumes would allow the local industry a chance at competitive supply, that can really only be achieved by large scale production. The biggest threat was that faced by local suppliers who now had to compete globally, with international suppliers who were far more advanced and cost efficient. The key mechanism of the MIDP was therefore incentivising exports of either locally assembled vehicle or locally manufactured components. The result of this was the rationalisation of the ranges of models produced locally. However this did not mean that the local market would be restricted to rationalised, locally produced model ranges. The MIDP catered for a reduction in importation duties so that OEMs could import other low volume, niche product lines. In fact, an OEM, if they exported in sufficient value and quantity, could earn enough export incentives in the form of Import Rebate Credit Certificates (IRCC) that could be used to offset duties paid during the importation of fully built up units (FBUs). 23 Gauteng s Automotive Value Proposition 2011

26 The vast majority of OEMs therefore embarked on programmes of import duty neutralisations. This simply meant that their exports earned them enough IRCCs to offset their entire import duty burden and they potentially paid zero duty on their imported vehicles. Those OEMs that imported all their vehicles without having any local assembly, now also had a chance to introduce their products at a competitive rate. If they could ensure that South Africa was included in their head office's global component sourcing initiatives, then they could request that they purchase certain key commodities from South Africa. Some of the components on which South Africa is competitive include catalytic convertors, leather products (seat covers) and alloy wheels. If the OEM could secure a portion of the global supply of one of these components from South Africa, they could meet their global target of sourcing components at a lower cost, as well as their local target of duty neutralisation. The typical MIDP schedule is as follows: Duty Rates and Qualifying Export Performance Value Year Rate of Duty CBUs (LCV & PC) 43.5% 40.0% 38.0% 36.0% 34.0% 32.0% 30.0% 29.0% 28.0% 27.0% 26.0% 25.0% Rate of Duty Imported Components (CKD) 32.5% 30.0% 29.0% 28.0% 27.0% 26.0% 25.0% 24.0% 23.0% 22.0% 21.0% 20.0% Eligible Value of Export Performance (CBUs & CKD) 100% 100% 94% 90% 86% 82% 78% 74% 70% 70% 70% 70% Source: ITAC, Department of Trade & Industry 24 The current MIDP programme will end in Although it has been highly successful, government is revising certain elements to assist the automotive industry in evolving into its next phase. The new programme, the APDP, will take effect in 2013, so it is important to note how government plans to incentivise the automotive industry in the future. Government's long term strategy is to widen and deepen the automotive industry, with the ultimate aim of reaching a total production volume of 1.2 million vehicles per annum, by The focus has shifted from an export view to one focusing on high volume local production. Under the MIDP, only motor assemblers had direct access to investment incentives, now components companies have the same right as well. This means that high volume production of vehicles and components will be incentivised, whether they are exported or consumed locally. On a practical level, this means that automotive companies will no longer need to produce export documentation to qualify for incentives, as is currently the case in terms of MIDP. To access incentives, each assembly plant must produce at least cars or light commercials annually and they can reach this target with one model or many. Having said that, an export project (preferably of one model, exported to various overseas destinations) is the most efficient way to achieve the target of vehicles, especially with low local demand. In that way, the economies of scale are achieved for both vehicle and component form and the complications of a multi-model assembly line are avoided. The new structure favours vehicle producers over component producers. This is not to say that the component industry is being prejudiced. High volume component production, instead of being focused on export to other plants for further value addition, is now being targeted to support high volume local assembly. This simplistically means that the additional value add that

27 was being done outside of South Africa, is now being encouraged to be done within South Africa. The APDP is essentially the MIDP, reworked with improvements. Like the MIDP programme, the APDP still only applies to passenger cars and light commercial vehicles. The table below shows the key features of the APDP. It must be noted that the APDP programme as a whole has not been finalised yet. The key stakeholders - government and the relevant automotive representative bodies - are still in negotiation in regard to the final structure and the appropriate level of the incentives being offered. Current MIDP rules therefore apply until The APDP will be finalised by then so that it may be introduced successfully in The four key mechanisms of the APDP are discussed below: a. Tariff Regime This will be fixed at the MIDP term end rates at 2012, i.e. from 2013 to 2020 at 20% import duty for components and 25% on CBU. (Vehicles from EU may enjoy a better rate of about 18% under the EU-SA trade agreement). b. Production Assistance This actually falls under the Vehicle Assembly allowance and is similar to the duty free allowance under the MIDP. Production assistance supports local assemblers by allowing them to bring in a portion of their CKD parts, duty free, to further support their local assembly competitiveness. Duty Rates and Qualifying % for key APDP Mechanisms a. Tariff - % Year Rate of Duty CBUs Rate of Duty Imported b. Local Assembly Allowance for OEMs c. Production incentive - % d. AIS - % (LCV & PC) Components (CKD) >50,000 units per plant *Table data subject to final approval Source: Projected Data, Department of Trade & Industry The mechanism for doing so will be the issuing of a duty free import rebate credit calculated at 20% (this figure will decrease by 1% annually for 3 years and will then remain fixed at 18%) of the ex factory price of the assembled vehicle multiplied by the CKD import duty rate. The more vehicles an assembler produces, the more it can offset its duty on the CKD parts used in its local assembly process. c. Value Added Support Value Added Support falls under the Production Incentive Scheme. Under MIDP, companies may claim against 70% of the local content value, multiplied by the applicable duty rates. Under APDP, companies will be allowed to claim against only 55% of the local value added content (this figure will decrease by 1% annually for 5 years until it reaches 50%, thereafter it will be fixed at that level) multiplied by the applicable duty rates. This support mechanism is a bone of contention for current exporters, who will not enjoy the huge benefit that they did under MIDP. 25 Gauteng s Automotive Value Proposition 2011

28 The issue of vulnerable industries like catalytic convertors, alloy wheels, steel, and all high material input commodities is still under discussion. The value of the material content that is to be considered value add is deemed to be 25%. All future component export models will have to be modified with these changes in mind. It should be noted that participation in the MIDP or APDP programmes is purely voluntary. A company may set up a facility here without taking advantage of the incentives offered by these programmes. There are numerous SKD facilities assembling low volume, special purpose vehicles or heavy commercial vehicles that operate profitably in South Africa. The government is looking at ways to roll out similar incentives for heavy commercial vehicle assemblers under the APDP. d. Investment Assistance This is now finalised under the Automotive Investment Scheme (AIS), replacing the Productive Asset Allowance (PAA) that was in the MIDP scheme. Companies are able to claim a taxable cash grant between 20% and 30% of the value of the capital investment in plant and tooling. This has been in place since July 2009 and there are comprehensive details available about the application processes, the qualifying criteria and claiming the grant from the Department of Trade and Industry. If a light commercial vehicle assembler wishes to participate and benefit from the incentive scheme, it will need to register with ITAC as well as meet the minimum requirements to be considered a CKD local assembler. The minimum requirements are outlined below: The potential vehicle assembler should apply through the DTI's ITAC department to be registered as a local assembler and therefore be granted permission to participate in the MIDP programme and be eligible for the benefits thereof. This applies to LCV assemblers only. With regard to the minimum local content requirements, the APDP does not prescribe any specific percentage local content, like the MIDP. Government's key focus is on encouraging local assembly that have economies of scale and increasing the depth of local component manufacturing to international output levels. The APDP is structured so that once an investment decision is made to do local assembly (CKD assembly) an assembler will find it more profitable to eventually support the programme with a localisation programme. The chances of doing a CKD assembly without some local content are very low. Typical components targeted for localisation are high cubic items with low packing density like bumpers, large metal pressings, seat assemblies, tyres, etc. The savings in the high logistics cost of importing them are the key justification for localisation of such components. There is a strong supplier base that can support this strategy. 26 The potential vehicle assembler must comply with CKD definition as stated in the South African Customs & Excise Act It states: "The extent of manufacture required to be undertaken within South African Customs Union Area (SACU) entails that the floor panels, body sides, and roof panels may be imported loose but have to be welded to each other in the SACU. Similarly the engine and transmission, axles, radiators, suspension components, steering mechanisms, braking or electrical equipment and instrumentation may be imported loose, but have to be fitted to the floor pan or chassis frame of the light motor vehicle within the SACU. The body or cab may not be imported in an assembled condition and has to be fitted to the floor pan or chassis frame within SACU. The assembly process should also further constitute at minimum a body shop, paint shop and trim shop." This investment in plant locally will be the actual contribution to the broader concept of local content (foreign direct investment, job creation, etc) rather than just local component content.

29 3.1.2 Other Incentives and Funding Schemes The South African government understands that in order to attract investment, a certain level of support is required from government. The mechanisms and access to such grants are best done in consultation with the respective government organisation responsible. Each respective organisation's contact details are listed at the end of this guide. Some of the incentives are discussed briefly below: EMIA (Export Marketing and Investment Assistance): The EMIA Scheme partially compensates exporters for costs incurred in respect of activities aimed at developing export markets for South African products and services. More details may be found on the DTI website. FIG (Foreign Investment Grant): The FIG is a cash incentive assisting foreign investors who are looking to invest in manufacturing businesses in South Africa. The FIG covers the associated costs (freight, travelling, installations) of bringing assets to South Africa up to a maximum of R3 million. More details may be found on the DTI website. 3.2 OEMs in South Africa and Investments Committed FORD: PRETORIA MAZDA 1 TON RANGER/DRIFTER FORD FIESTA 0.5 TON BANTAM BMW: PRETORIA BMW 3 SERIES Johannesburg Messina Polokwane PRETORIA NISSAN/RENAULT: PRETORIA NISSAN TIDA/LIVINA NISSAN HARD BODY NISSAN NP200 RENAULT SANDERO CIT (Critical Infrastructure Programme): The CIT is an incentive in the form of a cash grant, designed to improve critical infrastructure in South Africa. This incentive covers up to 30% of the development costs in qualifying infrastructure. More details may be found on the DTI website. Upington Kimberly Bloemfontein De Aar Ladysmith Richards Bay Durban TOYOTA: DURBAN COROLLA HILUX FORTUNER IF (The Innovation Fund): The Department of Science and Technology's (DS&T) IF has called on South Africa's inventors and entrepreneurs to develop solutions to the country's various technology challenges. A lot of focus is placed on new technologies in renewable energy as a means of reducing the country's reliance on fossil fuels. More details may be found on the DS&T website. IDC (Industrial Development Corporation): The IDC is a state-owned development financial institution that provides finance for the establishment and expansion of economically viable manufacturing industries. Finance is available for plant and equipment, factory, buildings and a portion of working capital. More details may be found on the IDC website. Cape Town Saldanha VOLKSWAGEN: UITENHAGE GOLF CHICCO POLO + VIVO GOLF CADDY Mosselbaai Port Elizabeth East London GENERAL MOTORS: PORT ELIZABETH CORSA ISUZU CHEVY SPARK MERCEDES BENZ: EAST LONDON MB C-CLASS MITSUBISHI TRITON The OEMs that are involved in local assembly of vehicles are shown in the map above, all of whom have been operating in South Africa for over three decades. They have contributed to and shaped the South African motor industry into what we see today. 27 Gauteng s Automotive Value Proposition 2011

30 They continue to strengthen their businesses in South Africa because they see the potential of the country as an assembly hub for manufacturing and exporting into sub-saharan Africa, Europe and the Americas. However, it is not a given to say that this will always be the case. It will require constant effort and improvement for South Africa to compete in the global market, especially against East European and Asian countries. The government understands this and programmes like the MIDP/APDP have worked well in addressing South Africa's competitiveness as an automotive hub. It also understands that this is an ongoing process. As much as each OEM has differing ways of conducting feasibility studies into doing business in South Africa, they have all come to the common conclusion that it is still viable to maintain their operations here. South Africa has five automotive cluster regions: Gauteng, Eastern Cape, KwaZulu Natal, Western Cape and the North West province. There is no vehicle assembly taking place in Western Cape and North West provinces, only component supplier activities. Gauteng manufactures 42% of all vehicles made for export. Eastern Cape contributes about 36% while KwaZulu Natal contributes 32%. KwaZulu Natal 32% Eastern Cape 36% Gauteng 42% Pie Chart 2: Percentage of vehicles for export The table below illustrates each OEM, the vehicles assembled locally and some of the investments that have been committed: OEM Year Models Assembled Locally Production Start Committed and Planned Investments BMW SA VW SA FORD SA GMSA Nissan/Renault Mercedes Benz Toyota BMW - 3 Series successor VW Polo & Vivo successors Distribution Centre Press shop Ford Ikon, Focus, Mazda 3, Bantam & Ranger Pickup, New T6 Pickup Opel Corsa, Chevy Utility, Chevy Spark, Isuzu Pickup Vehicle Distribution Centre Parts Distribution Centre NP 200 half ton pickup, Hardbody Pickup, Tiida, Livina Renault Sandero C-Class Mercedes, Mitsubishi Triton Corolla, Fortuner, Hilux Distribution Centre R2.2 billion R4.0 billion R230 million R500 million R3.0 billion R900 million R150 million R250 million R1 billion R2 billion R363 million TOTAL R15 billion 28

31 The OEMs are likely to re-evaluate their local production strategies as the industry transitions from the MIDP programme into the APDP programme. The MIDP focused on export and rationalisation of model ranges. The APDP is based on production volume and local added value. To access incentives under the APDP, each assembly plant must produce at least cars or light commercials annually. Whether they reach this target with one model or many makes no difference, although this is most efficiently done on high volumes of a single model. 3.3 Local Supplier Base For illustrative purposes, the map below shows a non-exhaustive list of suppliers per region. Messina Polokwane Hayez Lemmerz Auto Industrial Girlock TSW Bosch Supreme Springs CRH-Continental R G Brose Kiekert SA Eaton-Aeroquip Benteler ISE Draexelmaier Lear Venture Faurecia Shatterprufe Yenza Continental Herberts-Plascon Goodyear Tyres Dow Automotives GKN/Univel Tenneco/Gillet Borbet Takata-Petri TRW Shell Emcon SA Atlantis Foundries Saldanha Cape Town Upington PRETORIA Johannesburg Ladysmith Kimberly Bloemfontein De Aar East London Port Elizabeth Mosselbaai Durban Richards Bay Läpple Feltex Venture JCI Faurecia Lear Leoni Eberspächer Woco Becker First National Battery TI Group Carcoustics SA Rehau 29 Gauteng s Automotive Value Proposition 2011

32 The South African supplier base is a mix of international and local suppliers. Many of the international suppliers came to South African in line with strategic decisions to support their patron OEMs. The smaller local suppliers emerged when South Africa's approach to the automotive industry was best described as import protectionism. When the markets were opened to international competition, they survived by entering into strategic partnerships or being acquired by international players. Gauteng houses the majority of automotive suppliers (164), followed by KwaZulu Natal (84), Eastern Cape (82), Western Cape (20) and North West (20). They cover all the commodity groupings for vehicle manufacture viz. electronics, body parts, interiors, exteriors, chassis and drive trains. 30 KwaZulu Natal Gauteng Eastern Cape Pie Chart 3: Number of Automotive Suppliers per province The National Association of Automotive Component and Allied Manufacturers (NAACAM) represents the interests of automotive component manufacturers in South Africa and provides a forum through which to formulate policies and lobbies for the benefit of the industry as a whole. More information and a comprehensive list of automotive suppliers and the specific components they are able to manufacture may be found on the NAACAM website ( Western Cape North West 3.4 Production Statistics Domestic vehicle production statistics are shown in the table below. 2006, 2007 and 2008 were probably the best years the motor industry had ever seen sales slumped in accordance with the recession, but began to show signs of improvement in Initial calculations indicate that the motor industry's new vehicle-related sales turnover had improved by about 20% during 2010, to reach about R130 billion for the year. Projected 2011 sales are expected to be around units. This positive upward trend in sales, boosted mostly by the increase in export sales, is an indication that the tides are turning against the effects of the recession. The National Association of Automobile Manufacturers of South Africa (NAAMSA) believes that the positive influences of the economy and other developments outweigh the negative factors. In a media release on 10 January 2011, the following positives were summarised. Projected higher levels of economic activity, as well as the current positive sales momentum, will support higher new vehicle sales volumes into The continued improvement in new vehicle affordability, principally driven by the strong Rand and economies of scale production, as well as new model introductions, will further stimulate demand. Lower debt servicing costs following the 6.5% decline in interest rates over the past two years will facilitate further increases in demand for credit for new vehicle purchases. Demand by the car rental industry is expected to remain relatively strong on the back of further growth in tourism and business travel. From a macroeconomic perspective, industrial policy remains supportive of growth and should translate into a higher gross domestic product growth rate and assist increased demand on the part of the growing middle class in South Africa.

33 Sector /2009 % Change 2011 Projection Cars Light Commercials Medium Commercials Heavy, Extra Heavy, Commercials/Buses Total Vehicles % % + 4.5% % % Domestic vehicle production per year Source: NAAMSA Media Release, Jan 2011 When one looks at the historical production figures, particularly the 2006 high of vehicles, the governmental target of realising 1.2 million vehicle production by 2020 is realistically attainable. (The 1.2 million vehicle production target was conceived during government and the automotive industry strategic planning for the industry around The subsequent drop in sales due to the economic crisis was not expected at that time). This target is still the official target adopted by government. This is an indication that strategic plans and government support for the industry are well aligned with what is actually happening in the automotive sector, both on a local and global level. It also indicates that the local expertise and the body of knowledge around the industry are aligned with industry's stage of development and that the future vision for the industry is realistic and achievable. The prospects that the APDP programme will be as successful as the MIDP programme are very high. 3.5 Automotive Supplier Park The Gauteng province, in its drive to create world class infrastructure to support and grow the local automotive industry, created the Automotive Supplier Park (ASP). The establishment of the park is an investment from the Gauteng Provincial Government, through its strategic infrastructure development agency Blue IQ. This initiative involved the cooperation of the Department of Trade and Industry, Gauteng Provincial Government, Blue IQ, NAAMSA (specifically the OEMs in Gauteng) and NAACAM. There are three major OEMs in Gauteng. Two OEMs - Nissan/Renault and BMW - already have existing assembly plants in Rosslyn. Nissan Truck Plant, an SKD assembly facility, is also situated in Rosslyn. The third OEM, Ford Motor Company of Southern Africa (FMCSA), has its assembly facility in the east of Pretoria, in the Silverton industrial zone. The site chosen for the Automotive Supplier Park (ASP) is in the Rosslyn industrial zone north of Pretoria, which is one of the three major automotive manufacturing assembly clusters in South Africa. It is located less than 5 km from BMW and Nissan/Renault production plants and just 35 km from the FMCSA plant. The ASP is situated on a hectare site. The park and the surrounding Rosslyn area are host to a number of multinational and local suppliers that support the OEMs in the area. 31 Gauteng s Automotive Value Proposition 2011

34 Some suppliers in the park and surrounding areas are shown below: Supplier Lear Corporation Product Leather seat covers Proximity to Park Park Tenant Rosslyn is also home to many component tool makers that support the wide range of components produced in the area. The Supplier Park Development Company defines ASP's value proposition through four key offerings: SAS Automotive Systems Grupo Antolin Automotive Leather Company D&B Interiors Dash boards and trim Head liners Leather seat covers Centre consoles, electrical harnesses Park Tenant Park Tenant Park Tenant Park Tenant Premium Location Gauteng is one of three major automotive manufacturing regions in South Africa Gauteng is the economic hub of South Africa and contributes 34% of South Africa's GDP and robust manufacturing and business support industries Over 180 component suppliers are located in the province ASP is located less than 5 km from Nissan/Renault and 35 km from FMCSA There are well established downstream services and support industries on which the automotive industry relies Schenker Logistics UTi Johnsons Control International MA Automotive Eberspächer South Africa Logistics Service Providers Logistics Service Providers Seat assemblies Large metal pressings Exhaust systems Park Tenant Park Tenant <5km <5km <5km Property Management and Development Turnkey infrastructure development services for automotive developmental projects throughout Gauteng province Customised value-engineered buildings ASP offers a low risk property investment Lease term alignment to OEM contracts ASP guarantees availability of ready-to-develop land (greenfields) Business Support Services Labour management services ensuring adequate supply of high quality labour Production process optimisation solutions Business linkages and market development services to support tenants and suppliers in accessing new business within ASP, Gauteng and internationally Facilities management services 32

35 World-class ICT services Continued shared services model to reduce operational costs Managed access to government and other development agencies Highly skilled, customer-centric management team Optimised Logistics ASP is a world class automotive logistics node Centralised logistics operations co-ordination Access to strategic logistics gateway (rail, road and air) 3.6 Automotive Industry Development Centre (AIDC) The Automotive Industry Development Centre (Pty) Ltd is a Gauteng provincial government-owned proprietary company established to primarily provide support to the South African automotive industry in its drive for global competitiveness. It provides best practice solutions in: Facilitating government and industry developmental strategy; and Initiatives to implement related projects. Increasing the contribution of small enterprises to the automotive industry; Significantly progressing broad-based black economic empowerment; Increasing market access opportunities for and export of South African goods and services; Contributing towards building skills, technology and infrastructure platforms from which enterprises can benefit; Repositioning the Gauteng economy in higher value-added segments of value matrices in knowledge-driven manufacturing and services; Contributing to creating a manufacturing and services environment that would be attractive to foreign investors; Restructuring and consolidating AIDC activities in order to optimise its services; Improving all stakeholder and client relations, as well as relations with tertiary education and further education and training institutions; Embarking on a more aggressive marketing and communications campaign in order to deploy its skills and knowledge across a wider group of industry; Establishing itself, under the directives of the Gauteng province, as an industrial policy support agency; and Maintaining a sound business and communications relationship with its key stakeholders in local government, clients in the industry and the media and all training entities. It is the AIDC's mission to serve the South African automotive industry, government departments and government agencies to: Grow the global competitiveness of the Gauteng province specifically as well as the South African automotive industry; Support the government's industrial development related objectives; and Contribute to government and industry goals of continuous growth and sustainable job creation and skills development. The AIDC defines its three key focus areas as: Supply Chain Development - Moving the INDUSTRY towards global competitiveness Supplier Development - Moving the ENTERPRISE towards global competitiveness Skills Development and Training - Moving PEOPLE towards global competitiveness. Given its experience over the past years, and in partnership with its stakeholders, the AIDC has set itself a number of specific institutional objectives, as follows: 33 Gauteng s Automotive Value Proposition 2011

36 3.7 Business Case Compilation AIDC has the necessary institutional competence to understand that each company has its own way of compiling a business case, whether it is for investment in a new plant, a re-tool and refurbishment of a current facility due to new model introduction, or a component localisation study. The AIDC has an understanding and appreciation of the variables and inputs required to complete such a study, and is therefore capable of assisting potential investors in finalising such a study. It is also true that the "devil is in the detail" and for a first time investor, trying to understand the schedule set out in the incentive schemes such as the APDP can be a tangled web of information. Once the net cost for purchasing in Gauteng is established, it can be compared to a target cost to determine if it is in fact a saving or a loss to source from South Africa. Total cost of buying & shipping component to its destination Target costs from customer Net cost for purchasing from South Africa MIDP Credits Saving for customer Typical High Level Costing Model for purchasing from South Africa The AIDC can assist in clarifying these details, and advise on how best to integrate such variables in your current viability tools, so that an accurate net cost of doing business in Gauteng may be determined. In the automotive component supply business, it goes without saying that quality and on time delivery is non-negotiable. Competitive pricing, along with long term strategic relations, are the key determinants for the successful awarding of business. The AIDC has the relevant knowledge to help investors develop an all inclusive cost model for purchasing from Gauteng. This model will include all the typical cost elements involved in buying a component from the local supply base (ex works, tooling amortisation, etc) adding on logistics costs for shipping and finally, how to include the government incentives earned, on a unit cost basis. A proper feasibility study cannot be conducted in isolation by an international investor, whether it is a lead buyer doing a component localisation study, or an investor wanting to set up a green fields plant in Gauteng. Standard cost models need to be enhanced to cater for South Africa's unique offering. This can be done by contacting the local experts, such as the AIDC, who will help in understanding the local investor landscape, so that a full view may be taken when compiling a business plan. Only then will well informed investment decision be made. 34

37 4. Summary AIDC CEO, Mr Barlow Manilal South Africa has emerged from its turbulent past to become the leading democracy in Africa and boasts one of the most progressive constitutions in the world. Its post-apartheid iconic leadership ensured that its transition into democracy was smooth and that long term political stability was achieved. Seventeen years later, the country's diverse population does not see their differences as an obstacle that divides them, but rather as strength that unites them. They know that working together is the only way to achieve great things. The successful hosting of the FIFA 2010 Soccer World Cup is testament to this philosophy and proved the sceptics wrong. South Africa's macro-economic fundamentals are sound. It does not have the same problems that leading economies like the EU, America and Japan face. As an emerging market, it has recovered quickly from the effects of the recession, swinging negative GDP growth in 2009 to positive growth in Growth prospects for the future are projected to be between 4% and 5%. Inflation is within the South African Reserve Bank's target range of 3% to 6% and is expected to be range bound for the immediate future. The Reserve Bank continues to focus on pricing and financial system stability and has sufficient room to manoeuvre in using the interest rate as a tool to control inflation. 35 Gauteng s Automotive Value Proposition 2011

38 The South African government has made it clear that the automotive industry is a very important economic sector. It acknowledges the contribution the automotive industry has made to South Africa especially in job creation and accordingly plans to support and grow the industry going forward. The key actions to grow and support the industry to produce 1.2 million vehicles by 2020 are set out in the New Growth Path Plan and the Industrial Policy Action Plan. These are underpinned by incentive programmes like the Motor Industry Development Programme (MIDP) and its successor, the Automotive Production and Development Programme (APDP). The Gauteng province leads the South African economy. Gauteng alone contributed 33.9% towards the total South African GDP. It is also estimated to contribute around 10% of Africa's GDP. Gauteng's economy is greater than any other country in SADC (Southern Africa Development Community) and is the fourth largest in Africa. Gauteng's regional average GDP growth during 2002 to 2009 of 4.0% was higher than the South African national growth of 3.7% for the same period. In 2009, 41% of all light motor vehicles manufactured in South Africa originated from the Gauteng province. It hosts three of the seven local vehicle assemblers namely Nissan/Renault SA, BMW SA and Ford Motor Company of Southern Africa. It also hosts some 164 automotive component manufactures, producing a wide range of products. in the sector and can therefore assist in the compilation of detailed business plans. The Automotive Supplier Park (ASP) is a Gauteng infrastructure initiative aimed at improving logistics competitiveness for the local automotive sector. It offers prime location, property management and development, business and shared services and an optimised logistics service. Gauteng, although landlocked, is closer to the northern borders of South Africa, making it an ideally located gateway to sub-saharan Africa. It offers an excellent manufacturing base with access to various logistics corridors linking it to various distribution networks. It has a well developed road, rail and air infrastructure for the efficient export/import of goods. The South African automotive industry is ready and primed for new growth. Gauteng is at the centre of that growth path, with a vision to become the Autotropolis of Africa. Be part of that vision and invest in Gauteng; the Smart Province. The importance of the automotive sector in its local economy ensures that Gauteng always has a special focus on this sector. The provincial government agency, Blue IQ, which is responsible for strategic infrastructure in the province, has two subsidiaries dedicated to supporting the local automotive sector: AIDC and ASP. The Automotive Industry Development Centre's (AIDC) key focus areas are supply chain development, supplier development and skills development and training. The AIDC also facilitates investment, both local and foreign, 36

39 5. Directory of Contacts 5.1 Reference Matrix of Institutes and Support Offered: Automotive Investment Guidance General Investment Guidance Incentive Schemes and Funding Industrial Policy General Gauteng Information General Cost (Land, Labour, Utilities etc) Logistics Support and Costs (Road, Rail, Air, Sea) Research and Development Support Automotive Production Statistics Automotive Aftermarket OEM Information Detailed Information on Suppliers and Components AIDC ASP NAAMSA NAACAM AIEC RMI The Innovation Hub CSIR DTI ITAC DOL DED Blue IQ GEDA IDC City of Johannesburg City of Tshwane City of Ekurhuleni NUMSA 37 Gauteng s Automotive Value Proposition 2011

40 5.2 Key Automotive Stakeholders AIDC About AIDC: The Automotive Industry Development Centre is a Gauteng government agency that was established to provide support to the automotive industry. Relevance to Investor: The AIDC can facilitate investment enquiries in the automotive industry and can help prospective investors gather critical information to make an investment decision. They can provide expert automotive industry knowledge and implementation capacity Telephone: Telefax: Website: ASP About ASP: The Automotive Supplier Park was developed by Gauteng government as part of its strategic infrastructure to support the automotive industry. It is home to many international and local component suppliers and is managed by the Supplier Park Development Company (SPDC). Relevance to Investor: SPDC can assist the potential investor with key information related to setting up a building within the Gauteng region, such as available land, land cost, electricity infrastructure, liaising with local municipalities, etc. Telephone: Telefax: Website: NAAMSA About NAAMSA: The National Association of Automobile Manufactures of South Africa is the representative body for OEMs in South Africa. Relevance to Investor: NAAMSA can assist an investor with key industry statistics and provide a link to other OEMs, the DTI and the AIEC. They can also provide general investor facilitation support. Telephone: /1 Telefax: Website: NAACAM About NAACAM: The National Association of Automotive Component and Allied Manufacturers represents the interests of automotive component manufacturers. Relevance to Investor: NAACAM can provide details about the local supplier base and the wide range of automotive components manufactured locally. They can provide an investor with a link to such businesses and possible opportunities that exist for new suppliers. Telephone: /1 Telefax: Website: AIEC About AIEC: The Automotive Industry Export Council is a council supporting the South African automotive industry's export capabilities, such as types of products and export destinations. Relevance to Investor: AIEC is involved in the general promotion of South African automotive manufacturing capability as well as investigations and 38

41 research into new markets including additional opportunities in existing markets Telephone: Telefax: Website: RMI About RMI: The Retail Motor Industry Organisation of South Africa is the authority and representative body in the aftermarket retail sector of the South African motor industry. Relevance to Investor: RMI can provide insight into opportunities into the retail and aftermarket sector. Telephone: / Telefax: Website: The Innovation Hub About The Innovation Hub: This is Africa's first internationally accredited Science Park and a full member of the International Association of Science Parks. As such, it is the leading knowledge-intensive business cluster in South Africa. Relevance to Investor: Can provide both business and technology support. Telephone: Telefax: Website: CSIR About CSIR: The Council for Scientific and Industrial Research is South Africa's largest science and technology research organisation. The CSIR is one of the leading scientific and technology research, development and implementation organisations in Africa. Relevance to Investor: It can provide state-of-the-art research, technology and testing support. Telephone: Telefax: Website: Relevant Government Entities DTI About DTI: The Department of Trade & Industry facilitates trade and investment in South Africa for all business sectors. Relevance to Investor: DTI provides detailed support to investors every step of the way and advice on issues such as sector incentives, and how to access them. Telephone: (International) Telephone: (Customer Care Centre) Website: ITAC About ITAC: International Trade Administration Commission is the administrative arm of the DTI that controls the detailed workings of trading in South Africa. 39 Gauteng s Automotive Value Proposition 2011

42 Relevance to Investor: ITAC can help an investor to register to be eligible for incentives as well as advise on the claims procedure to be followed. Telephone: (International) Telephone: (Customer Care Centre) Website: Gauteng DED About DED: The Gauteng Department of Economic Development is responsible for creating an enabling business for encouraging economic growth in Gauteng. Blue IQ is a subsidiary agency of the Gauteng DED. Relevance to Investor: DED provides detailed support to investors throughout the investment process, including advice on issues such as sector incentives and how to access them. Telephone: Telefax: Website: Blue IQ About Blue IQ: Blue IQ Investment Holdings aims to deliver strategic economic infrastructure in support of developing Gauteng's local economy. Relevance to Investor: AIDC and ASP are subsidiaries of Blue IQ and are agencies that provide direct support to the automotive industry. Telephone: Telefax: Website: GEDA About GEDA: The responsibility of Gauteng Economic Development Agency is to implement policies in the areas of economic production, investment and trade. Its mission is to promote economic growth, encourage new investment and maximise opportunities for skills transfer and job creation. Relevance to Investor: GEDA is a one stop office that can assist investors in all areas of economic production, investment and trade in South Africa's wealthiest province, Gauteng. Telephone: Telefax: Website: IDC About IDC: The Industrial Development Corporation of South Africa is a self-financing, national development finance institution. It was established in 1940 to promote economic growth and industrial development in South Africa. Relevance to Investor: IDC provides financing to entrepreneurs and businesses engaged in competitive industries. Telephone: Telefax: Website: City of Johannesburg Relevance to Investor: The City of Johannesburg is able to provide details of the city such as economic trends, land development, city policy, and growth sectors. Telephone: Website: 40

43 5.3.8 City of Tshwane Relevance to Investor: The City of Tshwane is able to provide details of the city such as economic trends, land development, city policy, and growth sectors. Telephone: Website: Ekurhuleni Metropolitan Municipality Relevance to Investor: The City of Ekurhuleni is able to provide details of the city such as economic trends, land development, city policy, and growth sectors. Telephone: (Customer Care Centre) Website: Other Relevant Entities NUMSA About NUMSA: The National Union of Metalworkers of South Africa is the largest metalworkers union (and second largest trade union) in South Africa with close to members. Relevance to Investor: The majority of the automotive workforce holds membership to NUMSA. Telephone: /1/2/3 Telefax: /6408 Website: DOL About DOL: The Department of Labour publishes legislation that regulates labour practices and activities. Relevance to Investor: DOL is the source of labour practice and labour regulations in South Africa. Telephone: Telefax: Website: 41 Gauteng s Automotive Value Proposition 2011

44 42 6. Glossary of Terms AGOA AIDC AIS ANC APDP ASP BBBEE BRIC CIACM CIT CKD CPI CPIX CSIR DED DOL DS&T DTI EMIA EPWP ERA EU FBU FDI FIG FMCSA GDP GEDA GEGDS GEP GPG IDC IF African Growth and Opportunities Act Automotive Industry Development Centre Automotive Investment Scheme African National Congress Automotive Production and Development Programme Automotive Supplier Park Broad Based Black Economic Empowerment Brazil, Russia, India, China Competitiveness Improvement of Automotive Component Manufacturers Critical Infrastructure Programme Completely Knocked Down Consumer Price Index CPI without the effect of mortgage bond rates Council for Scientific and Industrial Research Department of Economic Development Department of Labour Department of Science and Technology Department of Trade and Industry Export Marketing and Investment Assistance Expanded Public Works Programme Enterprise Reference Architecture European Union Fully Built Up units Foreign Direct Investment Foreign Investment Grant Ford Motor Company of Southern Africa Gross Domestic Product Gauteng Economic Development Agency Gauteng Employment Growth and Development Strategy Gauteng Economic Propeller Gauteng Provincial Government Industrial Development Corporation The Innovation Fund

45 IMF IP IPAP2 IRCC JSE LCV MEC MHCV MIDP NAACAM NAAMSA NUMSA OEM PAA PGM PPI RMI SACU SADC SKD SME TIA UNCTAD International Monetary Fund Industrial Policy Industrial Policy Action Plan (Version 2) Import Rebate Credit Certificates Johannesburg Stock Exchange Light Commercial Vehicles Member of Executive Council Medium and Heavy Commercial Vehicle Motor Industry Development Programme National Association of Automotive Component Manufacturers National Association of Automotive Manufacturers of South Africa National Union of Metalworkers of South Africa Original Equipment Manufacturer Productive Asset Allowance Platinum Group of Metals Producer Price Inflation Retail Motor Industry Organisation of South Africa South African Customs Union Southern African Development Community Semi Knocked Down Small and Medium Enterprises The Innovation Agency United Nations Conference on Trade and Development 43 Gauteng s Automotive Value Proposition 2011

46 7. References New Growth Path Plan, Department of Economic Development Industral Policy Action Plan (IPAP2), Department of Trade and Industry Gauteng Employment, Growth and Development Strategy (GEGDS), Gauteng Department of Economic Development Training Manual on Statistics for FDI and the Operations of TNCs, Volume 1 FDI Flows and Stocks, United Nations Conference on Trade and Investment Doing Business 2011: Making a Difference for Entrepreneurs, The World Bank and the International Finance Corporation Roux, A Everyone's Guide to the South African Economy, 9th Edition. Cape Town: Zebra Press. Investec 4th Quarter 2010 Forecast Investec Unemployment Update. October 2010 Stats in Brief 2010, Statistics South Africa Annual Economic Report 2010, South African Reserve Bank Gauteng Economic Opportunity Atlas, Gauteng Economic Development Agency Tshwane Trade and Investment Guide, City of Tshwane

47 Globalisation and Restructuring in the South African Automotive Industry, Journal of International Development, Vol. 13, No 6. Professor A. Black NAAMSA Media Release: Comment On The December 2010 New Vehicle Sales Statistics, NAAMSA Automotive Export Manual South Africa, AIEC NAACAM 2010 Directory, NAACAM Automotive Investment Scheme (AIS) Programme Guidelines, Department of Trade and Industry Websites Rosslyn Automotive Supplier Park 45 Gauteng s Automotive Value Proposition 2011

48 Automotive Supplier Park, 30 Helium Road, Rosslyn Ext 2, Pretoria, South Africa Private Bag x 36, Rosslyn, 0200 Tel: Fax: