Localisation and Supply Chain Development in the SA Auto Industry

Policy Brief
18 March 2018

Barnes, J., Black, A., Monaco, L.

The production of the thousands of components which make up a vehicle comprise the heart of the automotive industry. All host country governments seek to promote greater levels of localisation of parts production. These efforts have a long history in South Africa (SA). The recently announced South African Automotive Masterplan (SAAM) sets ambitious targets in this respect, aiming to raise local content to 60% by 2035. This would represent a substantial increase on current levels of local content which are below 40%.

The SA automotive value chain is currently largely concentrated around OEMs (original equipment manufacturers i.e. vehicle assemblers) and their Tier 1 suppliers, with Tier 2 and 3 activity significantly underdeveloped. This is represented schematically in the figure below. Of the total value addition in the South African auto value chain, it is estimated that 40% is produced by the multinational OEMs, 40% by Tier 1 component manufacturers and only 20% by upstream firms. Such concentration also suggests the industry is structured like an island, with OEM and Tier 1 activity weakly connected to the rest of the domestic economy.

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Publication | 18 March 2021