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With government’s having identified the automotive sector as a key sector for economic development, private-equity investment firm Agile Capital is actively looking to invest further in the South African automotive sector.
“We foresee growth in the sector through localisation of parts and expect that demand for new vehicles will increase as the global economy recovers,” says Agile Capital principal Liz Kolobe.
The most notable driver for the local automotive sector is, in the popular coined phrase, ‘localisation and transformation’.
“Increasing the level of manufacturing in South Africa will have knock-on effects for the adjacent industries, which can only benefit the economy,” she adds.
Agile Capital aims to invest in businesses supplying products and services to original-equipment manufacturers or the associated tier-one, -two or -three suppliers because it expects localisation targets to create growth opportunities for these businesses – either through increasing their product ranges or product volumes.
Kolobe says the company is positioned to partner with the owners of these businesses and entrepreneurs to grow their businesses for the long term and is actively seeking such opportunities.
Its current investment in a local automotive adhesive manufacturer, and previous investments in reputable automotive aftermarket suppliers, has enabled Agile to garner knowledge of the sector, which it will use when investing more in the sector.
Growing the Workforce
“The main benefit of localisation is the positive impact it will have on South African manufacturing companies, which will create jobs,” Kolobe points out.
She says localisation should result in better returns for investors if they support the “right businesses”.
Further, there is likely to be investment in infrastructure to allow for the efficient flow of such goods, which, in turn, will benefit other industries.
Kolobe suggests the automotive industry will likely experience an influx of knowledge and skills into the country, and potentially new technologies, consequently increasing its competitiveness in the global market.
Additionally, localisation may also increase the resilience of South African supply chains by reducing reliance on foreign suppliers, making these less vulnerable to international supply chain challenges.
However, these benefits depend on creating an environment that encourages such investment and the flow of skills, as well as stabilising aspects such as electricity supply and labour relations.
“Transformation is a South African imperative, and Agile Capital believes that meaningful transformation, outside of ownership, will assist in developing smaller companies within the supply chain, giving them opportunities to participate meaningfully,” says Kolobe.
As a long-term investor, Agile Capital aims to invest in companies with a solid track record, tangible growth prospects and strong management teams, and to partner with the management teams to build sustainable businesses that achieve their growth aspirations.
“Growing the companies we invest in will have a positive impact on the sector and the South African economy,” she concludes.
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