1. H OW IS ASCCI WORKING FOR M ANUFACTURERS ?

2. SOUTH AFRICAN AUTOMOTIVE INDUSTRY SUPPORT The 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 Un-aligned support efforts

3. SOUTH AFRICAN AUTOMOTIVE INDUSTRY SUPPORT The 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 Aligned support efforts Resultant need to: 1 Set the strategic direction for industry support activities 2 Coordinate and align activities in line with the defined strategic direction

4. 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 Industry recommendation to Minister Davies of need to establish a national steering committee to: 1 2 Set the strategic direction for specific practically oriented competitiveness improvement projects 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 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. HOW ASCCI CAME ABOUT In 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 Technical steering committee established to develop a business plan Regional supplier representatives NAACAM OEM Purchasing Council NAAMSA 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) NUMSA NAACAM NAAMSA dti

6. WHO LEADS THE INITIATIVE An Executive Committee comprising key representatives from Suppliers, OEMs, Government and Labour provides strategic direction and oversight to the initiative Stakeholder categoryNAACAM & Cluster representativeCurrent members Suppliers KZN supplier representative1. Alex Holmes – MAHLE Behr * EC supplier representative2. Andy Dealtry – Ebor GP supplier representative3. Andrea Moz – Auto Industrial WC supplier representative4. Andrew Turner – Torre Automotive NAACAM Executive Director5. Robert Houdet – NAACAM Industry (OEMs) NAAMSA OEM Purchasing Council 6. Theunis Rootman – TSAM 7. John Astbury – GMSA GovernmentDTI 8. Mkululi Mlota 9. Renai Moothilal LabourNUMSA 10. Neo Bodibe 11. Tengo Tengela * Chair

7. WHAT IT SETS OUT TO DO ASCCI 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. WHAT IT SETS OUT TO DO ASCCI 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 * Chair Objective: Achieve comparable levels of supplier productivity to leading cost countries (as measured in Rand of MVA per Rand of employee cost) Projects focus on: Base operating standards WCM best practice implementation Shop floor skills Scarce skills Supplier capability Objective: Increase levels of localisation as value of vehicle sales ex-factory less all imported content (base condition: avg. 41% local content) Projects focus on: Raw materials pricing and beneficiation Tier 1 localisation Tier 2 localisation Investment in updated process technology Localisation Objective: Increased local content and generation of employment creation opportunities Projects focus on Blockages and enablers to competitive local supply SA market regulatory review Africa market regulatory review Facilitation of buyer-supplier linking Strategic insights

9. HOW ASCCI IS RESOURCED ASSCI 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 * Chair dti – 50% NAAMSA – 22.5% NAACAM – 22.5% NUMSA – 5% Catalytic fundingR 4.8m Directly leveraged resources R63.2m Indirectly leveraged resources OutputsR68.0m Impact Catalytic funding Directly / indirectly leveraged resources Figures in Rand million Year 1Year 2Year 3 BudgetSecureBudgetSecureBudgetSecure Supplier capability 9.737.4511.7212.77 From UNIDO, MERSETA, self funding service providers Localisation 9.594.008.17 From dti Strategic insights 1.310.821.150.60 From dti 54% 41% 5% 2 1 2 1

10. WHAT HAS BEEN DONE? SUPPLIER CAPABILITY The 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 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 Key points Standardisation and integration (suppliers n=68) 1.FMCSA (15) 2.GMSA (17) 3.NSA (14) 4.VWSA (18) 5.TSAM (20) 6.MBSA (11) 7.BMW (3) Commodity groupings (suppliers n=98) Linking of multi-site suppliers (suppliers = 52) Phase 1 (suppliers n=22) 1.Metal forming/ pressing n=17 2.Components n=16 3.Plastic moulding n=9 4.Autotrim n=11 5.Tyre / rubber n=3 6.Drivetrain n=2 7.Foundry/Forge n=2 8.Harnesses/ electronics n=5 9.Catalytic converters n=1 10.Other n=2 1 2 34 Phase 2 (suppliers n=18) Phase 3 (suppliers n=12) Initial Tier 1 suppliers will be supplemented by Tier 2, aftermarket and export oriented firms over the period Tier 1 Tier 3 Tier 2, aftermarket and export

11. WHAT HAS BEEN DONE? LOCALISATION The 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 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 Key points Broaden through increased use of existing capability (Build on existing local content) Deepen through new capability (New local content to SA) Retain local content through process upgrading (separate intervention area) 3 broad areas of localisation opportunity Focus: path of least resistance Difference between upper and lower quartiles suggests opportunity for localisation in the sub-sector

12. COST / BENEFIT ANALYSIS WHAT HAS BEEN DONE? STRATEGIC INSIGHTS The 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 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 Key points MEANINGFUL INCENTIVES DEMAND-SIDE INFLUENCE GOVERNMENT PARTNERSHIP JOINT COLLABORATIONSTRONG INSTITUTIONAL STRUCTURE CRITICAL MASS IN COLLABORATION SPECIFIC, TANGIBLE SUPPORT MUTUALLY BENEFICIAL OUTCOMES

13. COST / BENEFIT ANALYSIS The cost of establishing shared infrastructure, such as supplier parks, is high; business case needs to be clear and provide meaningful benefit. WHAT HAS BEEN DONE? STRATEGIC INSIGHTS The 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 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 Key points MEANINGFUL INCENTIVES Meaningful incentives are an important mechanisms to driving required behaviors (incentives to relocate to supplier parks; tax breaks to identified scarce skills). DEMAND-SIDE INFLUENCE OEM participation is important to encouraging collaboration and participation through the supply chain. GOVERNMENT PARTNERSHIP OEM dominance without government partnership tends to result in siloed development of the supply chain; and integration of SMEs can be compromised. JOINT COLLABORATION Joint collaboration to address common challenges is critical to developing and sustaining competitive advantage, especially in developing economies. STRONG INSTITUTIONAL STRUCTURE Any form of collaboration MUST have a strong institutional structure to govern the effective operation the initiative and meaningful delivery of progress. CRITICAL MASS IN COLLABORATION Regional critical mass is very important to encouraging investment and giving weight to programmes and decisions. SPECIFIC, TANGIBLE SUPPORT Government support must be very specific, and agreed on to ensure accountability and provide certainty to plans developed by collaborative initiatives. MUTUALLY BENEFICIAL OUTCOMES The outcomes of collaborative initiatives must be mutually beneficial (i.e. institutions and government must benefit as well as industry)

14. 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.comjulia.wedgwood@bmanalysts.com A: 3 rd Floor, East Wing, 158 Jan Smuts Avenue, Rosebank, Johannesburg