Investment firm Agile Capital foresees opportunities for growth in the local automotive original-equipment manufacturer (OEM) supply chain with a localisation target of 60% by 2035, which is in line with the South African Automotive Masterplan and the Extension of the Automotive Production and Development Programme.

OEMs are incentivised to provide support to empowered South African companies, with the aim of encouraging growth and innovation in the local industry, as well as a more transformed automotive supply chain, says Agile Capital principal Liz Kolobe.

Historically international car manufactures have consistently invested in production plants in South Africa. This includes the recent creation of the Tshwane Automotive Special Economic Zone in Rosslyn near Pretoria.

Financial investment is significant from various automotive companies and it is hoped that this will further unlock economic development for this area, from residential property developers, to any of the potential infrastructure investment, shops, services and then jobs which usually follow, states Kolobe.

Although investment seems to be on a positive trajectory in the automotive sector, the sector itself has been facing some challenges, which can slow growth opportunities.

Kolobe says the Covid-19 pandemic has revealed some fragility in global supply chains. These supply chains are under pressure, which has resulted in unresolved shortages of microchips and long lead times in other inputs.

There has also been a significant impact on direct and indirect sectors supplying into the automotive industry, she says, citing the recent increases in commodity prices and the cost of energy used in the production process.

Agile Capital sees significant export driven growth in the sector given that the majority of vehicles manufactured locally are exported. “The current rand weakness is good for exports out of the country,” she says.

Kolobe says as an investment firm, alignment is key, which brings its share of challenges.

“The success of any business requires a motivated management team and we have found that it is paramount to partner with people with whom you can have an open, honest relationship and be challenged in a healthy way for the good of the business.”

She notes that Agile Capital maintains a non-operational approach with investments, which means that all parties have an opportunity to implement their strategies and methodologies to ensure that the business thrives.

Management teams of companies in partnership with Agile Capital run their business, while Agile Capital provides financial support, mergers and acquisitions experience, and governance. Additionally, Agile has access to a diverse number of business networks that could assist with growth in any partner businesses.

Further, Agile Capital invests in only South African companies, but Kolobe says companies with exposure to markets outside South Africa, either through subsidiaries or trade agreements, are in line to create more opportunities for local growth, thus allowing for greater investment capacity.

Companies that have consolidated a presence and/or brand in South Africa will expand into sub-Saharan Africa and beyond, she says.

Kolobe believes that the African Continental Free Trade Area will make it easier for such companies to trade with the rest of Africa.

Moreover, government has put incent- ives and tools in place to support and grow the automotive sector, and Kolobe believes that this bodes well for its continued growth.

“We know that it is important to create an environment that encourages and supports investment in the country and can make an impact on the South African economy, especially with so many headwinds that prevail,” she concludes.