How is ASCCI working for Manufacturers?

1. How is ASCCI working for Manufacturers?

2. Un-aligned support efforts SOUTH AFRICAN AUTOMOTIVE INDUSTRY SUPPORTThe South African automotive industry has benefited and continues to benefit from strong support from a number of agencies; aligning these benefits to a common ambition is important to delivering maximum value to the industry

3. Aligned support efforts SOUTH AFRICAN AUTOMOTIVE INDUSTRY SUPPORTThe South African automotive industry has benefited and continues to benefit from strong support from a number of agencies; aligning these benefits to a common ambition is important to delivering maximum value to the industry Resultant need to: Set the strategic direction for industry support activities 1 Coordinate and align activities in line with the defined strategic direction 2

4. Industry recommendation to Minister Davies of need to establish a national steering committee to: 1 Set the strategic direction for specific practically oriented competitiveness improvement projects WHY ASCCI?Given the realities facing the South African automotive industry, industry stakeholders identified the need to establish a national structure to coordinate automotive supply chain development activities • Formulate a national competitiveness improvement strategy • Engage with local / provincial authorities on the development of local automotive sectors and clusters • Prepare budgets for specific investigations and projects 2 Facilitate, coordinate and oversee supplier competitiveness improvement activities • Monitor, coordinate and extend support to regional industries • Initiate, support and fund localisation research projects • Provide recommendations to the dti on appropriate service providers

5. Regional supplier representatives • NAACAM • OEM Purchasing Council • NAAMSA • NUMSA • dti HOW ASCCI CAME ABOUTIn response to this need, stakeholders set about developing a business plan and governance framework to provide the structure to delivering meaningful supply chain development activities to advance automotive industry competitiveness NAACAM Technical steering committee established to develop a business plan NUMSA dti Collaborative initiative with a 3-year business plan to provide the blueprint for coordinating and aligning automotive supply chain development initiatives Automotive Supply Chain Competitiveness Initiative (ASCCI) NAAMSA

6. WHO LEADS THE INITIATIVEAn Executive Committee comprising key representatives from Suppliers, OEMs, Government and Labour provides strategic direction and oversight to the initiative * Chair

7. WHAT IT SETS OUT TO DOASCCI sets out to establish and coordinate a strategy to enable competitiveness, growth, employment creation and transformation for the South African automotive industry via three strategic focus areas Objective Increase supplier Manufacturing Value Add (MVA) in support of producing 1.2m vehicles by 2020, increasing employment, enabling local supply chain capabilities, increasing local content & advancing transformation

8. Supplier capability Projects focus on: • Base operating standards • WCM best practice implementation • Shop floor skills • Scarce skills Objective: Achieve comparable levels of supplier productivity to leading cost countries (as measured in Rand of MVA per Rand of employee cost) WHAT IT SETS OUT TO DOASCCI sets out to establish and coordinate a strategy to enable competitiveness, growth, employment creation and transformation for the South African automotive industry via three strategic focus areas Localisation Projects focus on: • Raw materials pricing and beneficiation • Tier 1 localisation • Tier 2 localisation • Investment in updated process technology Objective: Increase levels of localisation as value of vehicle sales ex-factory less all imported content (base condition: avg. 41% local content) Strategic insights Projects focus on • Blockages and enablers to competitive local supply • SA market regulatory review • Africa market regulatory review • Facilitation of buyer-supplier linking Objective: Increased local content and generation of employment creation opportunities * Chair

9. 1 2 HOW ASCCI IS RESOURCEDASSCI has a budget of R68m for its current 3 year project plan; of this R4.8 million in catalytic funding is provided by the 4 key stakeholders for the executive function, while the remaining R63.2 million to be sourced for projects Directly / indirectly leveraged resources 2 1 Catalytic funding • dti – 50% • NAAMSA – 22.5% • NAACAM – 22.5% • NUMSA – 5% 54% 41% 5% * Chair

10. Key points Key points • World class manufacturing interventions currently being launched in identified priority subsectors; interventions will be deployed at 120 suppliers over the 3-year business plan period • Base operating standards has recently launched a project focusing on establishing TS16949 as a more effective indicator of base standards of operation, particularly amongst lower tier suppliers • A shop floor skills project is currently undertaking to create the qualification for machine operators in order to ensure it is aligned with the requirements of the role WHAT HAS BEEN DONE? SUPPLIER CAPABILITYThe supplier capability focus area has recently launched a number of projects, the most substantial of which is a programme to roll out WCM interventions at 30 suppliers in priority value chains • FMCSA (15) • GMSA (17) • NSA (14) • VWSA (18) • TSAM (20) • MBSA (11) • BMW (3) Tier 1 • Metal forming/ pressing n=17 • Components n=16 • Plastic moulding n=9 • Autotrim n=11 • Tyre / rubber n=3 • Drivetrain n=2 • Foundry/Forge n=2 • Harnesses/ electronics n=5 • Catalytic converters n=1 • Other n=2 Tier 2, aftermarket and export Initial Tier 1 suppliers will be supplemented by Tier 2, aftermarket and export oriented firms over the period Tier 3 1 Commodity groupings (suppliers n=98) 3 4 2 Phase 1 (suppliers n=22) Phase 2 (suppliers n=18) Phase 3 (suppliers n=12) Standardisation and integration (suppliers n=68) Linking of multi-site suppliers (suppliers = 52)

11. Key points • Initial focus from a localisation perspective: broadening local content through increased use of existing capability • Workshops hosted with OEMs to determine specific localisation opportunities • 15 priority opportunities identified together with list of key blockages to localisation(including tooling and investment costs, technology availabilty, cost of testing, and supplier availabilty and capability) • Next step: dti has made available funding to implement projects to address identified blockages WHAT HAS BEEN DONE? LOCALISATIONThe localisation focus area has identified a list of priority localisation opportunities together with a list of key blockages to localisation, which will be addressed with funding made available by the dti 3 broad areas of localisation opportunity Difference between upper and lower quartiles suggests opportunity for localisation in the sub-sector Deepen through new capability (New local content to SA) Broaden through increased use of existing capability (Build on existing local content) Retain local content through process upgrading (separate intervention area) Focus: path of least resistance

12. Key points • ASCCI commissioned research to identify key lessons for regional economic development support to the automotive sector; findings are currently being shared with provincial and municipal authorities • Funding is currently being sought to undertake a review of the African market and regulatory environment with the view to defining opportunities and mechanisms to leverage in respect of trade policy and other factors related to growing a viable, sustainable large scale African automotive market WHAT HAS BEEN DONE? STRATEGIC INSIGHTSThe strategic insights focus area looks at opportunities for automotive market growth, increasing local content and creating employment within and for the South African automotive industry JOINT COLLABORATION STRONG INSTITUTIONAL STRUCTURE MUTUALLY BENEFICIAL OUTCOMES DEMAND-SIDE INFLUENCE GOVERNMENT PARTNERSHIP SPECIFIC, TANGIBLE SUPPORT COST / BENEFIT ANALYSIS MEANINGFUL INCENTIVES CRITICAL MASS IN COLLABORATION

13. ASCCI is a collaborative initiative driven and funded by NAACAM, NAAMSA, the dti and NUMSA. The initiative is facilitated by B&M Analysts. Julia Wedgwood B&M Analysts T: +27 (0)11 465 6911 E: julia.wedgwood@bmanalysts.com A: 3rd Floor, East Wing, 158 Jan Smuts Avenue, Rosebank, Johannesburg