Designation and Procurement of Buses

1. Designation and Procurement of Buses March 2012

2. Bus Designation Employment and Local content Industry Commitments Government considerations Commercial opportunities for the local industry

3. IPAP II & Economic Rationale resuscitate and develop new manufacturing activities, (city, commuter bus, semi-luxury coach) value chains are underdeveloped - deepen VC and employment creating potential Government Demand : Municipalities (1700 / annum if 10% upgrade) BRT expansions (1200 buses) Industry Structure Bus designed, to carry more than 35 persons > 8500 GVM Chassis manufacturers : MBSA, MAN, and Scania (88% of Market) Body manufacturers & coachwork :BUSMARK, Marcopolo, Iveco, BUSCO Integral manufacturers production of entire bus : MAN, Iveco Bus tendering process? OEM Chassis Manufacturer Bodybuilder OEM Operator (1) Bus Designation

4. Employment & Local content 1600 people directly employed 1 – 7 multiplier up/downstream - plastic, rubber, material and tyre companies , sales servicing etc Bus body manufacturing average 70%-90% local content between 800 and 1200 hours to build and fit, manual labour. largest job creating segment. South Africa has an established bus body building industry. Chassis Assembly A bus chassis takes about 80 hours to assemble Engines and transmissions are highly automated - minimum manual labour input. Negotiating or demanding local chassis manufacture would therefore add minimal job creation, whilst incurring significant capital expansion costs. (2) Employment and Local Content

5. Local Content Local content incorporates, local parts, labour and overhead cost Desktop questionnaire, verification undertaken by ITAC Busbody: sheet metal, steel tubing, glass, seating, and tyres. Chassis : Limited value addition full importation of the chassis, power train, drive train and driver cockpit. Ability to scale up local content 40% capacity currently Key issues : Low market demand hamper investment in component development Import rebate makes it cheaper to import abroad . Emphasis on interchangeable components to attain economies of scale Local Content

6. Employment creation and retention Direct ( 25% increase ) / seasonality / excess capacity Value chain Localisation conditions Busbody must be local 80%, Chassis CKD with conditions Industry to deepen supply base, fuel tanks and tyre companies etc. Move to 90% local content 2015 (all buses) Productivity improvement No decline in quality of products – export off take Invest in R&D and apply cost effective productive measures Price Competition (inflation) Relative price of buses have remained below inflation , Status quo commitment South Africa were reported as being 20% ( India ) , 25% (China ) , -10 % (Brazil) -35% (EU). (3) Industry Commitments

7. Fleet Upgrading commitment Upgrading of fleets could be incorporated as a tender condition sustainable demand, Verification and enforcement Pre / post tender verification of local content the dti ,DOT, National Treasury, IDC, ITAC, and Proudly South African in the Central Procurement Committee. (3) Industry Commitments

8. Considerations by government : disposal of obsolete fleets , develop a recapitalization program Cash for clunkers program : (fleet 7, max 12/p/bus) Concessionary loan finance will be regarded as critical to make local purchases viable Long-term, 7 -12 year contracts for bus operators Tenders should standardise bus demand – EOS Tender: Order placement timing Legislation should lock private operating firms into the PFMA Central Procurement Bus Agency (IDC) 4) Government measures

9. 5) Commercial opportunities for the local industry • The department of Transport’s Strategy and Action Plan • Cabinet approval in March 2007 • intergraded rapid public transport network in 12 cities • The rolling out of BRTs across cities will have significant economic impact for the South African economy

10. THANK YOU