dac annual report 2012
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ÂTRANSCRIPT
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Contents
Key facts and numbers ....................................................................................................................... 1
Governance and compliance scorecard ............................................................................................... 1
Letter from the Chairman ................................................................................................................... 2
Letter from the Deputy Mayor ............................................................................................................ 3
Letter from the Chief Facilitator .......................................................................................................... 4
Profile of the automotive sector ......................................................................................................... 5
Scope of report .................................................................................................................................. 7
Vision, mission and objective ............................................................................................................. 7
Strategic priorities 1 ............................................................................................................................ 7
Background and institutional form ..................................................................................................... 8
Cluster conceptual model ................................................................................................................... 9
Executive Function ........................................................................................................................... 10
DAC Programme Activities 2012 ....................................................................................................... 12
Highlights of 2012 ............................................................................................................................ 21
Annual Financial Statements for the year ended 31 December 2012 .................................................. 24
Member listing as of December 2012 ................................................................................................ 29
Notes ............................................................................................................................................... 35
Contact Information ......................................................................................................................... 36
1
Key facts and numbers
• 38 member firms
• R2.8 m of expenditure in 2012
• Approximately 50% of funding leveraged from the private sector and sources other than the
eThekwini Municipality
• 11 years of solid delivery of services
• 11 successive years of unqualified financial audits
• 89.4% average assessment ratings for workshop related activities
• Recognised as an exemplar of clustering by various national and international government, non-
government and industry bodies
Governance and compliance scorecard
Registered as a Non-Profit Company (NPC)
Memorandum of Incorporation that entrenches Public-Private Partnership (PPP) model with
transparent governance and clear accountability
Clear business plan and accompanying implementation plan
Memorandum of Agreement (MOA) governing relationship with primary funder
Performance management and reporting systems that are effective and efficient
Financial control systems that are effective, efficient and transparent
Adequate solvency and liquidity provisions
Compliant with Tax Administration Bill (TAB) requirements
Clean, unqualified annual financial audit
Risk management practices that are effective, efficient and transparent
Competition Law checklist and related safeguards
Procurement systems that are effective, efficient and transparent
Service Level Agreement (SLA) governing relationship with facilitation service provider
Capacity to comply with funding agreements
Broad-Based Black Economic Empowerment (B-BBEE) level 4 contributor and 100% of expenditure
can therefore be claimed as Preferential Procurement
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Letter from the Chairman
On behalf of the Executive Committee of the Durban Automotive
Cluster (DAC) I am pleased to deliver the DAC’s 2012 Annual
Report.
The DAC continues to make good progress in respect of
promoting the growth and competitiveness of the KwaZulu-Natal
automotive manufacturing sector, demonstrating that it
represents a productive and effective partnership between the
private sector and the eThekwini Municipality.
While numerous industry support activities were undertaken
under the auspices of the Growth, Localisation, Skills,
Infrastructure, Transformation and Manufacturing Excellence
Programmes respectively, of great significance was the fact that
the Executive Committee also undertook a review of the DAC’s strategic direction. Initiated late in 2012
and completed early in 2013, the new strategy will guide DAC activities for the new few years.
I am also pleased to report that the cluster is in a healthy financial position. Income for 2012 totalled R
2 781 171 while expenses totalled R 2 791 291, resulting in a small net shortfall of R 10 120.
The Non-Profit Company remains compliant with all relevant legal and statutory requirements and
continues to receive unqualified, clean audits from PKF, the appointed auditing firm.
The Executive Committee firmly believes the new strategic direction of the Cluster positions it to
increase the value of activities to members. Accordingly, I think both industry and Government
stakeholders can look forward to an exciting year ahead.
Zamo Xaba
Chairman
3
Letter from the Deputy Mayor
As part of the eThekwini Municipality’s efforts to
provide an attractive environment for retaining and
attracting manufacturing investment in Durban, the
eThekwini Municipality and the KwaZulu-Natal (KZN)
automotive manufacturing sector established a cluster
initiative called the Durban Automotive Cluster.
Founded in 2002, the DAC’s purpose is to promote the
growth and competitiveness of the KZN automotive
manufacturing sector.
In 2012, the Cluster underwent a tender process for
facilitation services. This process was deemed to be transparent and fair and an exemplary example of
good governance.
The cluster has provided an effective platform for strategic and operational change in the automotive
sector in KZN and this is a powerful demonstration of what an industry can achieve through collective
action. The eThekwini Municipality recognises the importance of supporting this sector and recognises
its significance as a key contributor to the local and national economy. Looking ahead, with the new
strategic direction of the cluster, the cluster has the ability to deepen its value addition to industry even
further. It is therefore crucial that the DAC is provided with the necessary resources to facilitate the
delivery of these service offerings.
The importance of improving the industry’s broader competitiveness remains critical to enhancing the
prospects for future industry survival and sustainability. There is no doubt that clustering can result in
wide-spread economic benefits if the behaviours of cluster participants can be influenced in ways that
enhance the competitiveness and growth of individual firms and the overall value chains. We, as
eThekwini Municipality, over and above the cluster initiatives are seeking to deploy other
complementary approaches such as the provision of dedicated infrastructure facilities, improvements to
the overall business environment and red tape reduction. This is important in providing for economic
growth in this sector in the future.
Cllr Nomvuzo Shabalala
Deputy Mayor, eThekwini Municipality
4
Letter from the Chief Facilitator
The DAC’s funding of R2.8m for 2012 was employed as effectively
as possible and, where possible, used to leverage outcomes
disproportional to the limited amount of funding available. In this
regard I am also pleased to report that collaborative partnerships
continued to be explored and expanded in 2012.
Importantly, the achievements of the DAC would not have been
possible without the strategic direction and guidance of the
Executive Committee and the Technical Steering Committees
(TSCs). I would accordingly like to take this opportunity to thank
the members of the Executive Committee and the TSCs for their
on-going commitment, support and leadership.
The revision of the DAC’s strategic framework represents a very positive development for both public
and private sector stakeholders, and in 2013 the DAC’s activities will be realigned into the following four
programmes in accordance with the new strategic framework:
Market and Technology Access
Manufacturing Excellence
Skills
Infrastructure and Materials
The priority of transformation has been identified as being of central importance to multiple
programmes and as such activities relating to Enterprise Development and Preferential Procurement will
be dealt with as part of Manufacturing Excellence, while indicators relating to Employment Equity and
Skills Development will be dealt with as part of Skills.
Lastly, I hope this this report further affirms that the DAC is well positioned to engage with its 2020
objective through the implementation of its strategy.
Douglas Comrie
Chief Facilitator
5
Profile of the automotive sector
Global performance and emerging trends
The Global Automotive Industry’s performance in recent years indicates that the sector is recovering well
from the downturn in the global economy. This improved industry health is evident in respect of an
increase in annual production volumes for 2010 and 2011. In addition, the profitability of OEM and Tier 1
automotive component manufacturers has improved. Despite these improved indicators, the global
economy still faces considerable uncertainty with concerns regarding a US double dip recession and the
Euro Zone crisis. Going forward emerging economies will continue to drive global automotive industry
growth. Asia will likely be the dominant force in the short to medium term. The OEMs are increasingly
consolidating vehicle platforms in order to secure scale economies. As a result they are likely to favour
large Tier 1s that operate at a global level. The supply chain problems which were experienced in 2011
have also resulted in OEMs favouring multiple production sites for critical components. The global trend
towards “Green” will continue to affect the automotive sector with important production, technological
and strategic implications for the sector.
Vehicle production in South Africa
The automotive and automotive parts industry is the single biggest component of South Africa’s
manufacturing sector, comprising 6.1% of GDP. The South African automotive industry comprises of
seven major vehicle assemblers, a few medium and heavy commercial vehicle assemblers, and
approximately 360 component manufacturers. The industry’s regional concentration is informed by the
location of vehicle assemblers, with most component firms located in close proximity to BMW, Nissan
and Ford (Tshwane), Volkswagen and General Motors (Nelson Mandela Bay), Mercedes-Benz (Buffalo)
and Toyota (eThekwini).
The SA vehicle production achieved significant growth from 2004 to 2006 and in 2006 the SA vehicle
production was 550 000 units. The introduction of the National Credit Act and interest rate increase, as
well as global economic recession resulted in a downturn in SA vehicle production and this bottomed out
at 350 000 units in 2009. Since then the industry has recovered year on year and in 2012 was at 505 000
with significant growth projected in 2013, of 620 000 units. The SA automotive industry’s vehicle
production for domestic market versus exports has also shifted dramatically in recent years. In 2006 only
30% of production was for exports, and 70% for domestic use, whereas in 2012, approximately 55% of SA
vehicle production was for domestic consumption and 45% for exports (see Figure 1 below). South Africa
exports vehicles to 148 countries.
Figure 1: SA Vehicle Production for domestic and export markets
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Source: NAAMSA
The domestic market for vehicle sales has seen significant recovery since the economic recession in 2009
from a demand of just under 400 000 units in 2009 to over 600 000 units in 2012. The domestic sales are
dominated by passenger vehicles sales (Source: NAAMSA).
Automotive production in KwaZulu-Natal
The automotive manufacturing industry in KwaZulu-Natal is largely concentrated within the eThekwini
Municipality, but includes firms in Pietermaritzburg, Stanger, Ladysmith and Richards Bay. The industry
employs approximately 20,000 people and contributes substantially the local economy.
The KwaZulu-Natal automotive industry is dominated by Toyota South Africa Motors which operates in
the South Industrial Basin of the eThekwini Municipality. The plant has an installed capacity of 220 000
vehicles. It produced 156 000 vehicles in 2011 and was projected to produce 170 000 vehicles in 2012.
Approximately 70% of Toyota’s production in 2012 was IMVs (Hilux and Fortuner), 24% the Corolla and
the remaining 6% is constituted by the Quantum Bus. Toyota maintained its lead in 2012 as the number
one exporting OEM with over 25% of all vehicles in SA exported by Toyota. Volvo, and MAN Truck and
Bus (SA) have heavy vehicle assembly plants in the eThekwini Municipal Area. Bell Equipment, the capital
equipment manufacturer in Richards Bay, is a major purchaser of certain types of auto components, and
undertakes a higher level of manufacturing activities.
There are approximately 80 automotive component manufacturers in KZN. These firms are largely
concentrated in the eThekwini area, with some activity in the Pietermaritzburg and Richards Bay areas as
well.
0%
10%
20%
30%
40%
50%
60%
70%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13*
Pe
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nt
Un
its
Domestically produced vehicles for the export market
Domestically produced vehicles for the local market
Exports as % of total domestic production
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Scope of report
The DAC is a PPP between the eThekwini Municipality and the automotive industry in KwaZulu-Natal.
The annual report represents a review of the activities of the Section 21 Company (Registration N0.
2005/035247/08) for the year ending 31 December 2012.
Vision, mission and objective
Strategic priorities 1
1 Reflects the revised strategic framework adopted following the strategy development process undertaken towards the end of 2012.
•Promote the growth and competitiveness of the KZN automotive manufacturing sector.
Vision
•Establish mutual competitive advantages and help the sector overcome generic challenges.
Mission
•Industry MVA growth of 100% in real terms between 2012 and 2020, thereby enabling
employment growth and private sector investment
Objective
Cost competitiveness
Access to increased scale of
production
Access to product &
process technology
Competitive operating
efficiencies
Competitive skills
Enabling infrastructure
Growth in MVA
Competitively priced input materials
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Background and institutional form
The DAC was established in January 2002 with the primary purpose of developing the competitiveness of
the KwaZulu-Natal automotive industry. DAC members constitute over 90% of all automotive
manufacturing activity in KwaZulu-Natal. The operating model entails industry contributing technical and
management expertise to focused Technical Steering Committees (TSCs), with these TSCs then in turn
reporting into an Executive Committee comprising both industry and local government representatives.
(Reflects the revised strategic framework adopted following the strategy development process undertaken towards the end of 2012)
Executive Committee
Market & Technology
Access
Manufacturing Excellence
Skills Development
Infrastructure & Materials
External Affairs
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Cluster conceptual model
Overview
The principle of clustering is in essence one of
enhancing the competitiveness of a regional
industry through collective interventions, which are
more likely to be successful than isolated efforts.
Clustering efforts are therefore based on
undertaking rigorous research followed by the
facilitation of joint activities or interventions
through securing firm-level input into the specific
opportunities identified.
Methodology
A successful and sustainable clustering model is dependent on a range of key principals, the most
fundamental of which are:
. 1. Partnership
A balance between private sector and public sector objectives and interests needs to be maintained, with this
principle applicable to goals, commitment, time, and funding.
2. Industry leadership and ownership
Industry leadership and ownership enables higher levels of commitment from industry and ensures validity of
cluster initiatives.
3. Trust relations
Clustering represents a partnership between the public and private sector that is enabled by cluster facilitators.
Transparency, reliability and accountability are important in the relationships that exist between the various
parties
4. Reliability and consistency
A cluster’s credibility is enabled through reliable and consistent delivery, with this taking place within a
framework of defined objectives, transparent leadership and strong trust relations.
5. Flexibility
The ability to adapt to changing external factors is important and as such a cluster should be able to adapt to
emerging industry threats and opportunities while keeping within a framework that maintains credibility and
accountability.
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Executive Function
The DAC is an industry driven initiative, drawing on the leadership and expertise of individuals from a
broad range of automotive member firms and using it to identify and address a wide variety of
challenges confronting the automotive industry. The Executive Committee’s responsibilities can be
considered to be primarily:
Strategic direction and oversight of implementation
Corporate governance and compliance
The members of the Executive Committee for the year ending 31 December 2012 are listed below.
Z. Xaba HR Director Kaymac Group
Chairman of Executive Committee Chairperson of Skills Development TSC
A. Turner 1 Managing Director
Ramsay Engineering Deputy Chairman of Executive Committee Chairperson of Localisation TSC
A.Velleman 2 General Manager
Toyota Tsusho Africa Chairman of Infrastructure TSC
D. Msomi 3 Group HR Manager
Feltex Automotive Division Chairman of Transformation TSC
A. Holmes Commercial Director Behr South Africa
Chairman of Growth TSC
B. Muggeridge General Manager Feltex Fehrer
Chairman of Manufacturing Excellence TSC
S. Tulsiram Head Economic Development eThekwini Municipality
eThekwini Municipality Representative
S. van der Ham Department Manager Toyota Boshoku South Africa
Nominated Toyota Representative
T. Waldburger Director Behr South Africa
Nominated Industry Representative
S. Pillay Manager: Supplier Development Toyota South Africa Motors
Nominated Toyota Representative
T. Rootman General Manager: Purchasing Toyota South Africa Motors
Nominated Toyota Representative
D. Comrie Managing Director B&M Analysts
Non-Voting Chief Facilitator
M. Arde Executive Designate B&M Analysts
Non-Voting Facilitator
Prof J. Barnes Chairman B&M Analysts
Non-Voting Facilitator
1. A. Turner (Managing Director, Ramsay Engineering) served as Deputy Chairman of the Executive Committee and Chairman of Localisation TSC until November 2012.
2. S. Konar (Supply Chain Director, Smiths Manufacturing) served as the Chairman of the Infrastructure TSC until October 2012. 3. D. Msomi (Human Resource Executive, Feltex Automotive) served as the Chairman of the Transformation TSC until November 2012.
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Constitution
The activities of the DAC are governed by its Constitution. The Constitution specifies, amongst other
things, objectives, membership requirements, decision making processes and the appointment of a
facilitation service provider. During 2012 it was agreed that the Constitutional requirements would be
incorporated into the NPC’s new MOI.
Compliance and Transformation
The Executive Committee pro-actively identifies and puts in place mechanisms to ensure that the DAC is
compliant with relevant legislation. Appropriate measures have been put in place to ensure compliance
with the New Companies Act, Tax Administration Bill, International Financial Reporting Standards (IFRS),
Competition Act, Broad-Based Black Economic Empowerment (B-BBEE), Municipal Finance Management
Act (MFMA) and Public Financial Management Act (PFMA).
The Cluster is a verified ‘Level 4 contributor’, or what the Codes define as being 100% B-BBEE compliant.
Facilitation
Cluster facilitation services are provided by an independent team from Benchmarking & Manufacturing
Analysts SA (Pty) Ltd (B&M Analysts) appointed by the Executive Committee.
Founded in 1997, B&M Analysts provides high value, specialised services to drive sustainable industrial
development. These services are provided to government, non-government organisations (NGOs),
clusters, industry associations, and manufacturing companies.
B&M Analysts is a verified Level 2 B-BBEE contributor under the Codes of Good Practice for Broad-Based
Black Economic Empowerment. 125% of expenditure on B&M Analysts' services can therefore be
claimed as Preferential Procurement, allowing customers to boost their own B-BBEE scores.
For more information on B&M Analysts please visit www.bmanalysts.com.
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DAC Programme Activities 2012
Growth Programme
Overview
The DAC has identified the areas of market access and investment support as being central to facilitating
growth opportunities for the KwaZulu-Natal automotive industry. These strategic issues are handled
under the auspices of the Growth Programme.
The priorities of the Growth Programme are as follows:
Position firms to better understand domestic and international markets and therefore access growth
opportunities.
Promote supplier excellence in support of growth objectives.
Facilitate opportunities through collaboration with key stakeholders (notably in the fields of
localisation projects, exports to European Union (EU) countries and exports to Southern African
Development Community (SADC) countries.
Support re-alignment of member firm strategies with the new policy environment, specifically
focussing on the APDP.
Programme Activities
The key activities covered under the auspices of the programme are outlined below.
Automotive Production and Development Programme (APDP) Focus
The Automotive sector’s incentive programme, the Motor Industry Development Programme (MIDP),
ended at the end of 2012. In preparation for the new incentive programme, the Automotive Production
and Development Programme (APDP) which came into effect at the beginning of 2013, much of 2012
was spent gearing member firms with the necessary knowledge to prepare for the programme.
As a result, several firm-specific and general knowledge sessions took place to achieve this objective, as
well as supporting activities. These included the continual dissemination of the documentation from the
International Trade Administration Commission of South Africa (ITAC), notifying member firms of the
regional sessions being facilitated by ITAC, providing feedback to member firms of key points for
consideration as they emerged over the course of the year, as well as the facilitation of information and
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knowledge sessions. The sessions were held for executive, senior and middle managers, as well as
persons involved in operational and non-operational activities, including Sales, Purchasing and IT.
In support of the APDP focus for member firms a session on the Automotive Investment Scheme (AIS),
the investment support element of the APDP, was also facilitated.
Industry Support Programmes
A comprehensive review of incentive and related supplier support initiatives was presented to members.
The presentation covered initiatives in the fields of investment, competitiveness improvement, skills
development, Research & Development and trade.
Supplier Excellence
ADEPT Airmotive, an advanced piston aircraft
engine manufacturer located at Virginia Airport,
presented on the incentives and related initiatives
that they have benefitted from. The presentation to
members covered their design and innovation
activities, as well as the Green Cluster that they are
involved in which will be located in Pietermaritzburg. The firm was the Autodesk Inventor of the year in
2008 and received the Chairperson’s Award at the SABS Design Excellence Awards in 2010.
During the first Quarterly Session, presentations regarding the lessons that emerged from the Turkey
Study Tour were undertaken. This was supported by a discussion regarding the relevant lessons for
member firms.
Enabling Localisation Opportunities and Business Linkages
On-going engagements and relationship building meetings took place with local OEMs and in particular
the OEM Purchasing Council during the course of 2012.
Trade and Investment KwaZulu-Natal (TIKZN) arranged a KZN Pavilion at the SA Automotive Week
(SAAW) in October. Five DAC affiliated firms had stands on the pavilion. TIKZN’s support is hereby
acknowledged.
The third Quarterly Session included a presentation by representatives from Toyota Tsusho Africa on key
issues pertaining operating in the African market, including challenges and countermeasures.
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Lastly, dialogue with the Pietermaritzburg Chamber of Business (PCB) provided insights into the
Passenger Rail Agency of South Africa (PRASA) refurbishment and recapitalisation programme, including
how they should go about registering as a supplier so that they can be considered as potential suppliers.
Localisation Programme
Overview
In order for the automotive sector to be sustainable and competitive in the long-run, localisation needs
to take place. The cluster has identified purchasing skills and the development of tier two automotive
suppliers as two key areas to focus on under the localisation programme. The objective of the
programme is that through raising the local content, large levels of risk will be mitigated through the
avoidance of exchange rate volatility, duties and tariffs, and logistical costs.
Programme Activities
Development of Purchasing Skills
The Localisation Programme identified developing purchasing skills as key in maintaining
competitiveness and sustainability of suppliers, issues central to localisation. This activity therefore
focused on assisting procurement personnel to further develop their knowledge in order to achieve
more effective purchasing outcomes. In 2012, the DAC facilitated the sharing of best practice amongst
members. Topics explored included Risk Mitigating Factors Regarding International Sourcing; Costing;
and Appropriate costing models.
Product and Process Investment
An effective relationship between cluster members and key Government incentive programmes has
been facilitated. A significant success in this regard has been a R7.2m localisation project involving Behr
South Africa and a group of its strategic Tier 2 suppliers. This project will deliver benefits in the areas of
product and process technology, employment creation and increased economic activity.
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Supplier Coaching Programme
A supplier coaching programme was successfully implemented in partnership with the The Netherlands
Trust Fund II (NTF II) at 14 suppliers. The project focused on enhancing operational competitiveness of
South Africa’s automotive components in KwaZulu-Natal, specifically Tier 2 and Tier 3 suppliers. The
programme achieved significant successes which are highlighted in the following section of the report.
Visualising Flow Lean Workshop
The DAC hosted a capacity building workshop for suppliers on visualising flow and the common
characteristics and parameters that improve flow and productivity in the automotive industry. This
workshop was facilitated by an international lean consultant, Mr Furahashi and Prof. Norman Faull from
the Lean Institute. Mr Furahashi has worked extensively in industries in Japan and abroad on promoting
the Toyota Production System. Over the past four years he has been working on an automotive supplier
development programme designed by the Japanese for India and this workshop demonstrated the key
learning's from this programme. The workshop was well attended with 22 participants representing eight
DAC member firms, raising the level of skills and lean understanding in the local sector.
Coordinated capacity building by customers
Coordinated capacity building by customers – commonly referred to as the Joint Supplier Audit and
Development (JSAD) programme - aims to provide supplier development support to Tier 1 suppliers
looking to develop the capacity of their key Tier 2 suppliers. Two JSAD Groups service approximately 40
suppliers between them. In 2012, Group 1 focussed on growing the knowledge and understanding of
their suppliers in terms of ISO/TS 16949 and the benefits and means of compliance. The JSAD Group 2
consisting of Behr SA; Federal-Mogul Powertrain Systems; GUD Filters; Pi Shurlok; and Toyota Boshoku
SA suppliers in 2012 looked at the theme of “Back to Basics”. Lean, the importance of 5S and Value
Steam Mapping were some of the topics explored within the group. These workshops provided suppliers
with both theory and the opportunity to see first-hand best practices at work at Tier 1 firms through
factory tours.
TPM Programme
Total Productive Maintenance (TPM) focuses on improving machine availability through better utilisation
of maintenance and production resources. TPM originated in Japan in 1971 and is widely recognised as
being effective in enhancing competitiveness. As a result of considerable interest on the part of member
firms, the DAC facilitated three focused contact sessions with international expert Arthur David in 2012.
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Skills Programme
Overview
Skills retention, attraction and development are critical factors for the building of competitiveness in the
automotive sector.
Programme Activities
HR Excellence
The highly successful HR forums and capacity building sessions continued into 2012. Through these
interactions, HR professionals from a wide range of member firms were provided with insights into best
practices and current HR-related issues. Topics explored include Performance Leadership versus
Traditional Performance Management; The Dynamic Potential of Corporate Community; Credit
Crunching Workers’ Performance; The Psychology behind Strike Action and Preventative Action; and The
Recent Industrial Action and Labour Instability.
Management Development Programme
The Management Development Programme (MDP) for the automotive industry aims to equip middle
managers with the necessary competence to not only implement their organisations’ strategic
objectives, but to help them build their skills in managing people. The MDP was structured to provide its
15 participants with a broader understanding of leadership and management as well as to strive to bring
real business benefits to participants and their organisations. The programme has been developed in
partnership with the University of Stellenbosch (USB) Business School.
Graduate Development Program for Engineers
The ‘Graduate Development Programme for Engineers’ is a programme designed to support the
development of scarce engineering skills in the automotive industry in KwaZulu-Natal. This is achieved by
providing graduates with the necessary outcomes based training and work experience to become Design,
Industrialisation, Process, Purchasing/Logistics, Quality, Lean Manufacturing or Project Engineers. DAC
firms enrolled a total of 11 engineers in the program in 2012, further equipping graduates to increase
their skills and productivity levels.
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Skills Retention
The DAC continued the rollout of the successful partnership established with South African Business
Coalition on HIV and AIDS (SABCOHA). Through this process, an increased number of DAC members and
their employees participated in a comprehensive HIV and AIDS programme, which include HIV Testing
and Counselling as well as access to treatment and care.
Various training and educative sessions were held over the year which included Peer Educator Training
by the KZN Department of Health and the South African Clothing and Textile Workers Union (SACTWU)
who also provided HIV Counselling and Testing (HCTs) for cluster members.
Skills Attraction
The cluster undertook two very successful career exhibitions at the University of KwaZulu-Natal (UKZN)
and the Durban University of Technology (DUT), namely the World of Works Career Fair and the
Graduate Recruitment Programme Career Exhibition. Furthermore, plant tours were undertaken Federal-
Mogul Powertrain Systems and Behr SA for UKZN Engineering students and first year UKZN mechanical
engineering students, attracting future graduates into the sector.
Infrastructure Programme
Overview
The availability of well-maintained, good quality and reliable infrastructure is crucial for achieving
industrial competitiveness. The priorities of the Infrastructure Programme are as follows:
Support improved logistics efficiency through best practice,
Ensure competitive logistics costs from service providers, and
Facilitate optimal benefit from Eskom’s energy efficiency programmes
Programme Activities
Logistics
This sub-programme focuses primarily on reducing logistics costs, eliminating inefficiency, improving
reliability and knowledge creation. Logistics best practice workshops were facilitated by the DAC. In
2012, members explored the Development Plan for the Intermodal Logistics Hub at Cato Ridge,
benefited from a presentation by SARS on preferred trade status, received an update on the proposed
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automotive supplier park, and looked at shipping and its current challenges on a global basis. Members
were also invited to see first had the Durban Container Terminal of Transnet.
Critical updates from energy stakeholders
In 2012, the DAC facilitated the dissemination of information through this forum which included a
presentation by Eskom focusing on utilising the standard product toolkit to measure and reduce
consumption; and Cornerstone Consultants who explored interventions and technology available to
reduce energy consumption.
Energy assessments & access to Eskom support programmes
Energy efficiency audits, sponsored and facilitated by NCPC, a subsidiary of CSIR, were conducted and
completed at various member firms. These audits comprised of a 3 day energy assessment and an Energy
Management Systems (EnMS) implementation.
Resource Projects and Carbon Footprint
It is crucial for firms to be aware of their greenhouse gas emission so as to be ready for tax in light of the
intended introduction of a Carbon Tax by Treasury in 2013, which is a tax based on a company’s
greenhouse gas emission. In 2012, a B&M Analysts’ Facilitator was trained as a ‘Carbon Footprint
Analyst’ by Global Carbon Exchange, and through the DAC, provided firms with free Carbon Footprint
assessments. Through the analysis of firms’ primary emitters and the collection of data, the DAC
provided firms with an individual carbon report, allowing members to become increasingly aware of the
implications of current emissions and consider ways of mitigation going forward.
Transformation Programme
Overview
Given the extent of social challenges that exist in South Africa, transformation and empowerment are
vital areas for attention in the automotive sector. The Transformation programme’s objective is to
improve industry performance across all B-BBEE indicators through the sharing of best practise as well as
the development and promotion of Black-owned SME’s.
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Programme Activities
B-BBEE Best Practice
Best practices in broad-based black economic empowerment (B-BBEE) workshops and knowledge
sharing in the various indicators supporting the improvement of firm level performance was explored
with members in 2012. B-BBEE training was held to educate new employees in the HR departments and
to serve as a refresher course for other employees on the latest legislative developments.
SME Development
The DAC has continued to assist Black-owned SME suppliers through a multifaceted developmental
process. In recognition of the fact that the smaller size of these firms necessitates specific support that
will assist them in terms of their growth and expansion, benchmarking and strategy development
activities were employed. Benchmarking is undertaken against national and international automotive
performance standards to identify priority improvement areas that can in turn be used to inform a
planning and strategy development process. In 2012, the DAC identified five Black-owned firms to
participate in the SME Development Programme and assisted in conducting viability studies with these
firms and with the development of market linkages. Workshops and training courses were arranged and
coordinated for the SMEs, such as Strategic Marketing and Planning Course, a 5-S workshop, and a
measurement workshop.
Stakeholder Engagement
The stakeholder engagement function has served as a means of engaging with parties that can add value
to the DAC in the field of transformation. This encompassed continual, active interaction with
government departments, business associations, industry associations and various transformation
service providers.
Manufacturing Excellence Programme
Overview
The DAC assists member firms to achieve World Class Manufacturing status through various initiatives
run under the auspices of the KZN Chapter of the SAABC. This chapter is treated as the Manufacturing
Excellence programme of the DAC. Participants in this programme have at their disposal a tool to assist
them in understanding how competitive they are and identify benchmark performance levels, while also
20
allowing them to learn from firms facing similar pressures and challenges to their own that have
successfully adopted World Class Manufacturing practices.
Programme Activities
Firm-Level Benchmarking
Using a firm-level value chain model benchmarking approach, the annual competitiveness benchmarking
assessments provide member firms with a clear understanding of their operational competitiveness
strengths and weaknesses from both an intra and inter-firm organisational perspective. The benchmark
further provides an insight into a firm’s ability to meet and exceed competitor performance levels.
Six market drivers, namely cost, quality, value chain flexibility, value chain reliability, human resource
development and innovation, are assessed both quantitatively and qualitatively through the SAABC
benchmark methodology. These market drivers are benchmarked against both lean manufacturing best
practices and against an extensive global competitiveness database.
WCM workshops and factory tours
The WCM programme comprises practically-orientated, World Class Manufacturing workshops focusing
on Total Productive Maintenance (TPM), Total Quality Management (TQM), and Continuous
Improvement (CI) respectively. These capacity building sessions are aimed at a management level, with
an increased focus on the practical application of TPM, TQM and CI. Shop floor assessments and reviews
of practices and tools in the workplace are undertaken. Participants benefited from visits to two OEMs,
namely Volkswagen and Mercedes Benz’s, as well as numerous additional world class manufacturers.
Newsletters
Newsletters containing relevant information for cluster members were compiled quarterly and
distributed to members. The following pertinent topics were covered over the course of the year:
Closing the Operational Gap
Turkey: The Rising Star in the Automotive Industry
The Cost of Production Downtime from Machine and Tooling Breakdowns to the SA Automotive
Component Sector
The Potential Impact of APDP on the Automotive Component Sector
Series on country comparison of input costs: Focus on Cost of Labour
21
Highlights of 2012
DAC Annual General Meeting
The Durban Automotive Cluster celebrated its 10 Year Anniversary at an Annual General Meeting and
Conference on 22 August 2012 at the Moses Mabhida Stadium in Durban. The event was utilised to
reflect on the journey of the South African automotive industry over the past 10 years, as well as the
specific experiences of the Durban Automotive Cluster in the local automotive industry over the same
period. The DAC was privileged to host key stakeholders from the automotive industry, namely Prof.
Justin Barnes (expert on the SA automotive industry), Prof. Kriengkrai Techakanont (expert on the Thai
automotive industry), Nimrod Zalk (Deputy Director - General Industrial Development Division, dti),
Mbuso Ngubane (Regional Secretary, NUMSA), Nigel Ward (Vice-President Manufacturing Support
Group, Toyota South Africa), Douglas Comrie (Chief Facilitator, DAC), and Andrew Turner (former
Localisation chairperson).
Supplier Development – Coaching Programme in Partnership with NTF II
Challenge
The Automotive Component sector is becoming increasingly competitive with cost down pressures from
OEM’s being filtered down the value chain. This means that suppliers are increasingly having to find ways
to improve their businesses and take cost out of their operations.
Intervention
The DAC in partnership with the Netherlands Trust Fund II (NTF II) implemented a supplier
competitiveness improvement initiative with 14 participating companies. The project focused on
enhancing operational competitiveness of South Africa’s automotive component manufacturers in
KwaZulu-Natal, specifically Tier 2 and Tier 3 suppliers.
Output
The programme achieved great successes with a few examples of programme outcomes achieved being:
Successful implementation of Kanban system with programme thus improving production pull and
customer delivery reliability
5S programme enabling improved standardisation, flow and visibility of plant
Revision of costing model
Development of business plan
Bolstering of a firm’s financial management practices
22
Value stream mapping
Problem solving of waste in businesses
Implementation of Quality circles
Development of marketing and sales strategy
Carbon Footprint Assessments
Challenge
Carbon Footprint is becoming a critical issue for firms to understand and be aware of, in view of the
looming Carbon Tax expected to be introduced by Treasury in 2013 based on a company’s greenhouse
gas emission.
Intervention
The DAC, through B&M Analysts’ trained a facilitator and provided members with free Carbon Footprint
assessments in 2012.
Output
Through the analysis of firms’ primary emitters and the collection of data, the DAC provided firms with
an individual carbon report, allowing members to become increasingly aware of the implications of
current emissions and consider ways of mitigation going forward.
Management Development Programme
Challenge
The lack of effective management skills was identified by the cluster as a potential limitation to the
competitiveness of the automotive sector going forward.
Intervention
The DAC in partnership with Stellenbosch University Graduate School of Business ran a Management
Development Programme (MDP) for DAC member firms for a second time in 2012. The MDP is a
comprehensive programme that equips managers with the necessary competence required to
implement their organisations' strategic objectives. It develops a basic understanding of the different
fields of management to ensure that managers do not perform their own management functions in
isolation. This intervention is set apart because it provides a broader understanding of management and
leadership, and in this way brings real business benefits to participants and their organisations.
23
Output
A total of 15 students enrolled in the MDP programme in 2012. Three pertinent, automotive orientated
topics were explored in the group learning projects, which are outlined below:
An investigation into unplanned absenteeism and
the abuse of sick leave in the automotive sector, in
order to enhance productivity
Poor communication at firm-level
The APDP as a tool for global competitiveness
stakeholders and how to use it to enhance the
effectiveness and efficiency of stakeholders.
24
Annual Financial Statements for the year ended 31 December
2012
Independent Auditors Report
To the members of Durban Automotive Cluster (Association incorporated under Section
21)
Report on the Annual Financial Statements
We have audited the financial statements of Durban Automotive Cluster (Association incorporated under
Section 21), which comprise the statement of financial position as at 31 December 2012, and the
statement of comprehensive income, statement of changes in equity and statement of cash flow for the
year then ended, and a summary of significant accounting policies and other explanatory notes, and the
directors’ report, as set out on pages 5 to 14.
Directors’ Responsibility for the Annual Financial Statements
The directors are responsible for the preparation and fair presentation of these annual financial
statements in accordance with the International Financial Reporting Standards, and requirements of the
Companies Act of South Africa, and for such internal control as the directors determine is necessary to
enable the preparation of annual financial statements that are free from material misstatements,
whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these annual financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the annual financial statements. The procedures selected depend on the auditors’ judgement, including
the assessment of the risks of material misstatement of the annual financial statements, whether due to
fraud or error. In making those risk assessments, the auditors consider internal control relevant to the
entity’s preparation and fair presentation of the annual financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the annual financial statements.
25
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the annual financial statements present fairly, in all material respects, the financial
position of Durban Automotive Cluster as at 31 December 2012, and its financial performance and cash
flows for the year then ended in accordance with International Financial Reporting Standards and the
requirements of the Companies Act of South Africa.
Supplementary information
Without qualifying our opinion, we draw attention to the fact that supplementary information set out on
page 15 does not form part of the annual financial statements and is presented as additional
information. We have not audited this information and accordingly do not express an opinion thereon.
Report on Other Legal and Regulatory Requirements
With the written consent of all members, we have performed certain secretarial duties.
PKF DURBAN
Registered Auditors
Chartered Accountants (S.A.)
Practice number: 906352E
31 March 2013
Durban
Directors’ report
The directors submit their report for the year ended 31 December 2012.
Review of activities
Main business and operations
The company is engaged in the provision of cluster-based development support to the automotive sector in
Durban and surrounding areas and operates principally in South Africa. The operating results and state of
affairs of the company are fully set out in the attached annual financial statements and do not in our
opinion require further comment.
26
Going concern
The annual financial statements have been prepared on the basis of accounting policies applicable to a
going concern. This basis presumes that funds will be available to finance future operations and that the
realisation of assets and settlement of liabilities, contingent and commitments will occur in the ordinary
course of business.
Events after the reporting period
The directors are not aware of any material fact or circumstance arising between the end of the financial
year and the date of this report that would require adjustments to the annual financial statements.
Authorised and issued share capital
There were no changes in the authorised or issued share capital during the year under review.
Dividends
No dividends were declared or paid to shareholders during the year
Directors
The directors of the company during the year and to the date of this report are as follows:
D.S. Comrie
A.G. Holmes
C.B.M. Muggeridge
T.F.J. Rootman
Z.D. Xaba
A. Velleman
T. Acton
Secretary
The company had no secretary during the year.
The registered office of the company is:
2nd Floor
12 on Palm Boulevard
Gateway
Auditors
PFK Durban will continue in office in accordance with Section 90 of the Companies Act of South Africa.
27
Statement of Financial Position
Figures in Rand Notes 2012
R
2011
R
ASSETS
CURRENT ASSETS
Trade and other receivables 3 302 351 306 001
Cash and cash equivalents 4 184 814 304 253
487 165 610 254
EQUITY AND LIABILITIES
Equity
Accumulated Loss (90 343) (80 223)
Liabilities
Current Liabilities
Trade and other payables 6 344 501 595 739
Income received in advance 5 233 007 94 738
577 508 690 477
Total Equity and Liabilities 487 165 610 254
Statement of Comprehensive
Notes 2012
R
2011
R
Revenue 7 2 776 025 2 363 369
Operating expenses (2 791 290) (2 284 504)
Operating (loss) profit (15 265) 78 865
Investment revenue 5 145 6 280
(Loss) Profit for the year (10 120) 85 145
Other comprehensive income - -
Total comprehensive income (10 120) 85 145
28
Statement of Changes in Equity
Accumulated loss
R
Total equity
R
Balance at 01 January 2011 (165 368) (165 368)
Changes in equity
Total comprehensive income for the year 85 145 85 145
Balance at 01 January 2012 (80 223) (80 223)
Changes in equity
Total comprehensive income for the year (10 120) (10 120)
Balance at 31 December 2012 (90 343) (90 343)
Statement of Cash Flows
Notes 2012
R
2011
R
Cash used in operations 10 (124 584) (592 658)
Interest income 5 145 6 280
Net cash from operating activities (119 439) (586 378)
Total cash movement for the year (119 439) (586 378)
Cash and cash equivalents at the beginning of the year 304 253 890 631
Total cash and cash equivalents at end of the year 4 184 814 304 253
29
Member listing as of December 2012
Company name Altech UEC
Telephone +27 (31) 508 2800
Facsimile + 27 (31) 539 3370
Email [email protected]
Website www.uec.co.za
Company name Apollo Tyres South Africa
Telephone +27 (31) 242 1111
Facsimile +27 (31) 242 1366
Email [email protected]
Website www.dunloptyres.co.za
Company name Aunde South Africa
Telephone +27 (31) 913 8000
Facsimile +27 (31) 913 8001
Email [email protected]
Website www.aunde.com
Company name Autostick Screenprint
Telephone +27 (31) 309 1444
Facsimile +27 (31) 309 1999
Email [email protected]
Company name Autovest
Telephone +27 (31) 536 8005
Facsimile +27 (31) 536 8012
Email [email protected]
Website www.autovest.co.za
Company name Avlock International
Telephone +27 (31) 579 1510
Facsimile +27 (31) 579 1520
Email [email protected]
Website www.avlock.co.za
Company name Behr South Africa
Telephone +27 (31) 719 7750
Facsimile +27 (0) 86 262 6483
Email [email protected]
Website www.behrgroup.com
30
Company name Bell Equipment
Telephone +27 (35) 907 9111
Email [email protected]
Website www.bellequipment.com
Company name Central Component Distributors
Telephone +27 (31) 902 8134
Facsimile +27 (31) 902 6850
Email [email protected]
Website www.connectco.co.za
Company name Commercial Elastic Manufacturers
Telephone +27 (31) 465 5036/7
Facsimile +27 (31) 465 6894
Email [email protected]
Website www.commcem.co.za
Company name Duys Component Manufacturers
Telephone +27 (31) 713 1700
Facsimile +27 (31) 713 1727
Email [email protected]
Website www.duys.co.za
Company name Expert Automotive Trim
Telephone +27 (31) 791 0202
Facsimile +27 (31) 791 0203
Email [email protected]
Website www.expertautotrim.co.za
Company name Federal-Mogul Vehicle Safety and Protection
Telephone +27 (31) 913 3500
Facsimile +27 (31) 912 2722
Email [email protected]
Website www.federal-mogul.com
Company name Federal-Mogul Powertrain Systems
Telephone +27 (31) 717 3300
Facsimile +27 (0) 86 505 0204
Email [email protected]
Website www.federal-mogul.com
31
Company name Feltex Automotive Trim
Telephone +27 (31) 460 4200
Facsimile +27 (31) 460 4290
Email [email protected]
Website www.feltex.co.za
Company name Feltex Fehrer
Telephone +27 (31) 460 4200
Facsimile +27 (31) 460 4290
Email [email protected]
Website www.feltex.co.za
Company Name
Telephone
GUD Filters
+27 (31) 910 3111
Facsimile +27 (31) 902 4889
Email [email protected]
Website www.gud.co.za
Company name Hesto Harnesses
Telephone +27 (32) 437 6700
Facsimile +27 (32) 552 5414
Email [email protected]
Website www.hesto.co.za
Company name Hulamin
Telephone +27 (33) 395 6911
Facsimile +27 (33) 394 6335
Email [email protected]
Website www.hulamin.co.za
Company name IJ Component Manufacturers
Telephone +27 (31) 305 9543
Facsimile +27 (31) 301 1144
Email [email protected]
Website www.ijcomponents.co.za
Company name
Kaymac Structural Foam
Telephone +27 (33) 387 1507
Facsimile +27 (33) 387 2911
Email [email protected]
Website www.kayroto.co.za
32
Company name L&J Tool and Engineering Works
Telephone +27 (31) 914 4294
Facsimile +27 (31) 914 4893
Email [email protected]
Website www.ljtools.co.za
Company name Macc Vert Precision Engineering
Telephone +27 (31) 468 9360
Facsimile +27 (31) 468 9381
Email [email protected]
Website www.marineandgeneral.co.za
Company name Marine and General Engineering
Telephone +27 (31) 461 5008
Facsimile +27 (31) 461 5012
Email [email protected]
Website www.maccvertengineering.co.za
Company name Maritzburg Engineering
Telephone +27 (33) 386 9081
Facsimile +27 (33) 386 1970
Email [email protected]
Company name Pfisterer
Telephone +27 (33) 397 5400
Facsimile +27 (33) 387 6377
Website
www.pfisterer.co.za
Company name Pi Shurlok International
Telephone +27 (31) 845 4700
Facsimile +27 (31) 571 0825
Email [email protected]
Website www.pi-shurlok.com
Company name Pressure Die Casting
Telephone +27 (33) 397 5500
Facsimile +27 (33) 397 5555
Email [email protected]
Website www.pdc.co.za
33
Company name Ramsay Engineering
Telephone +27 (33) 387 1575
Facsimile +27 (33) 387 4535
Email [email protected]
Website www.ramsay.co.za
Company name Saayman Danks Electroplating
Telephone +27 (31) 465 6858
Facsimile +27 (31) 465 8481
Email [email protected]
Website www.sdelectroplating.co.za
Company name Springquip Manufacturing
Telephone +27 (33) 342 8650
Facsimile +27 (33) 342 5064
Email [email protected]
Website www.springquip.co.za
Company name Shanco
Telephone
Facsimile
Website
Company name
+27 (31) 702 3223
+27 (31) 702 2756
www.shanco.co.za
Smiths Manufacturing
Telephone +27 (31) 719 4911
Facsimile +27 (31) 719 4240
Email [email protected]
Website www.smiths.co.za
Company name Toyota Boshoku South Africa
Telephone +27 (31) 949 4000
Facsimile +27 (31) 949 4100
Email [email protected]
Website www.toyota-boshoku.sa.com
Company name Toyota South Africa Motors
Telephone +27 (31) 910 2911/4750
Email [email protected]
Website www.toyota.co.za
Company name Toyota Tsusho Africa
Telephone +27 (31) 949 5000
Facsimile +27 (31) 949 5224
Email [email protected]
Website www.ttaf.co.za
34
Company name Truth Electronic Manufacturing
Telephone +27 (31) 822 8555
Facsimile +27 (0) 86 591 4465
Email [email protected]
Website www.truthelectronics.co.za
Company name
Wave Paper
Telephone +27 (31) 705 3344
Facsimile +27 (31) 705 3346
Email [email protected]
Website www.wavepaper.co.za
Company name Webroy
Telephone +27 (33) 387 2331
Facsimile +27 (33) 387 3026
Email [email protected]
Website www.webroy.co.za
35
Notes
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36
Contact Information
Durban Automotive Cluster
Tel: +27 (0) 31 764 6100
Fax: +27 (0) 86 607 4510
Email: [email protected]
Unit 3 St Heliers Office Park
Valdean Rd
Gillitts
3610
South Africa
PostNet Suite 10139
Private Bag X7005
Hillcrest
3650
South Africa
www.dbnautocluster.org.za
37