The Eastern Cape Development Corporation (ECDC) today launched in Gqeberha a R50 million blended finance scheme designed for emerging Eastern Cape-based micro, small and medium sized automotive component suppliers, and aftermarket service providers.
Introducing the Automotive Operator Blended Finance Scheme, ECDC chief executive officer Ayanda Wakaba says the focus on this segment of the market is a bid to bridge current funding gaps facing small and medium operators due to resource constraints, lack of an elaborate business history, lack of collateral, informal nature of business operations, and barriers to market which affect access to opportunities. The scheme is offered on a 70% loan and 30% incentive basis to applicants who must be individuals and/or companies who have been in operation for 12 months and who are majority black owned. The minimum disbursement figure for the blended finance scheme is R300 000 with a maximum of R1 000 000.
“The scheme is mainly targeted at the emerging operator segment in the form of aftermarket operators (services and components). It will fund fixed fixtures, equipment, machinery, stock and other distinct critical industry compliance or operating environment improvement measures such as a specific accreditation or growth programme, or specialised training. The blended finance scheme intends to increase the number and size of the operations of emerging automotive component suppliers and aftermarket service providers, while transforming others into large-scale automotive operators.
“This segment of the market is ripe for meaningful support considering that the Eastern Cape’s Original Equipment Manufacturers (OEMs) and component suppliers employ about 60,000 people. The province’s aftermarket operators are made up of a considerable number of small black operators which are a source of employment and livelihood for many families. The Automotive Operator Blended Finance Scheme intends to exploit the potential of the sector by using this funding instrument to attract more service opportunities for this targeted group. The blended finance approach is meant to stimulate the sector and support increased job creation security among micro, small and medium operators,” Wakaba says.
National President of the Johannesburg headquartered African Panelbeaters and Motor Mechanics Association Sisa Mbangxa, says the scheme is the first of its kind directly targeted at emerging automotive component suppliers and aftermarket service providers.
“This blended finance scheme is critical in supporting the growth of our members. Access to finance packages like these helps emerging suppliers to compete effectively in the automotive industry. This is good news for our 85 members in the Eastern Cape and by extension the 350 members that form part of our national footprint. We have a provincial office in East London and another in Ngcobo servicing members who are panel beaters, mechanics, auto electricians, spares suppliers as well as fitment centres. We will ensure that they take advantage of this opportunity to grow their businesses and support their competitiveness,” Mbangxa says.
Wakaba says the Eastern Cape’s rich automotive history is demonstrated by the presence of five Original Equipment Manufacturers in the province, Daimler Chrysler, Volkswagen, Isuzu, FAW and BAIC. The province accounts for 46% of South Africa’s production volumes while accounting for 56% of the country’s vehicle exports. The sector features many aftermarket service providers and component suppliers.
“However, there is a realisation that the automotive industry needs to adopt transformation initiatives to empower historically disadvantaged individuals to participate in the industry value chain. It must provide opportunities for new entrants to enter the industry, and to foster meaningful participation. Looking at the demographics of participants in the sector, it clear that there is a need for meaningful participation of Historically Disadvantaged Individuals in the sector.
“This is why we are intensifying efforts to support the growth, development and the sustainability of the sector in the province. As the sector grows, we intend to assist in bringing multiple micro, small and medium component suppliers and aftermarket service providers into the mainstream value chain while opening access to markets for them to grow their operations to compete with established players in the component and aftermarket services ecosystem,” explains Wakaba.
The scheme addresses access to finance challenges with the aim of eliminating some of the barriers which result from financial resource limitations.
“Considering the varied nature of the prevailing empowerment and industry transformation barriers, we are cognisant that the blended finance intervention will not resolve all the identified challenges. Efforts by both the public and private sector towards transforming the sector must be backed by resources to achieve this purpose,” Wakaba adds.
