OPINION | AT both the Naacam Show and the Naamsa SA Auto Week 2025, industry leaders in the automotive sector highlighted how US tariffs, coupled with domestic challenges such as plant closures and a sluggish economy, are putting pressure on an industry that contributes nearly 5% directly to GDP and sustains more than 100,000 jobs in vehicle assembly and components
Kebalepile Matlhak (pictured), ESD transformation specialist, The BEE Chamber warns that without a strategic approach, the ripple effects could extend far beyond automotive assembly, affecting steel, plastics, textiles, logistics and related industries. But there is a pathway forward: leveraging legislative support frameworks like the Automotive Investment Scheme (AIS) in support of the South African Automotive Masterplan 2035 and embedding Enterprise and Supplier Development (ESD) into core business strategy will lead to a more resilient automotive sector.
Why AIS Matters
AIS is a government incentive scheme designed to encourage investment in new and replacement models, as well as to strengthen the supplier base and stimulate exports. With foreign competition increasing and tariff barriers rising, AIS funding has become vital to keeping South Africa’s auto industry competitive.
Importantly, to qualify for AIS, automotive assembler manufacturers must hold a minimum Level 4 B-BBEE certification, and that means businesses must show meaningful ESD compliance. In short, transformation is not just a moral imperative or a compliance exercise, it is a gateway to accessing funding that can ensure survival.
Enterprise and Supplier Development: The Missing Link
ESD compliance requires manufacturers to actively support black-owned suppliers and integrate them into their supply chains. This approach seeks to reduce reliance on imported components and build local resilience through increasing local content on locally assembled vehicles.
For example, a Tier 1 supplier that develops partnerships with black-owned SMEs for specialised components not only meets BEE scorecard requirements but also strengthens the localisation agenda embedded in SAAM2035. This localisation drive is critical for weathering global volatility, including trade tariffs, shipping disruptions and geopolitical shifts.
From MIDP to SAAM2035: A Policy Journey
The Motor Industry Development Programme (MIDP), introduced in the 1990s, was designed to open South Africa’s automotive sector to global trade. It was followed by the Automotive Production and Development Programme (APDP), which introduced stronger incentives for local content.
Today, APDP 2, operating under SAAM2035, focuses squarely on transformation, innovation, and competitiveness. Its goals include achieving 60% local content, doubling employment in the sector, and expanding annual production to 1% of global vehicle output. Achieving these targets depends heavily on successful integration of smaller suppliers and meaningful skills development, areas where ESD has a direct role to play.
The challenges facing the automotive sector mirror those experienced in other industries under pressure from imports. The recent closure of Goodyear’s tyre plant in the Eastern Cape substantial production reduction at the Nissan Rosslyn plant following competitive pressure, are stark reminders of how quickly global trends can decimate local capacity.
If unchecked, similar outcomes could threaten the viability of South Africa’s auto component manufacturers. This would have a knock-on effect on steel producers, PVC suppliers and logistics companies. These are industries that rely heavily on the health of automotive manufacturing.
The BEE Chamber urges businesses to strategically integrate ESD into their operations, companies not only maintain B-BBEE levels needed for AIS funding but also strengthen their resilience against global shocks. Transformation provides access to financial support, secures stronger supply chains, and ensures that businesses are aligned with national policy goals under SAAM2035.
The survival and growth of South Africa’s automotive industry will depend on balancing global trade headwinds with local imperatives for transformation and job creation. By leveraging AIS, APDP 2, and ESD, the industry has tools at its disposal to begin addressing external pressures and drive growth.
The BEE Chamber is a business consultancy based in Gauteng, established to provide the support necessary to ensure that BEE Practitioners perform effectively.
