South Africa’s automotive sector is gearing up for a major localisation push that could unlock R30 billion in procurement opportunities.
But while this initiative has the potential to boost local manufacturing and create jobs, township-based small and medium-sized enterprises (SMEs) say they risk being left on the sidelines unless targeted support helps them overcome the barriers that keep them out of the country’s most lucrative value chains.
Trade, Industry and Competition Minister Parks Tau recently announced that increasing local content in automotive production by just 5% could translate into billions of rands in additional business for local manufacturers.
The automotive industry is one of South Africa’s economic powerhouses, contributing 4.9% to national GDP and employing more than 110,000 people.
Since 2011, the government’s Automotive Investment Scheme (AIS) has injected R20.7 billion into the sector to encourage component manufacturing and attract R76 billion in private investment.
While the scheme has spurred growth among established companies, many township businesses have been unable to access these funds.
Beauty Khumalo, who runs a small auto-component manufacturing workshop in Soweto, these opportunities remain frustratingly out of reach.
She explained that while she has tried to apply for AIS funding, the process is extremely complex and requires resources that small operators like her simply do not have.
“Government says the money is there, but the application forms and requirements are overwhelming. I am a mechanic and a businesswoman, not an accountant or a lawyer. Without expensive consultants to guide me, it feels impossible to qualify. Meanwhile, bigger companies with the right knowledge and connections keep moving forward while we stay stuck,” Khumalo said.
The National Association of Automotive Component and Allied Manufacturers (NAACAM) acknowledged that there is a clear divide between large firms and smaller township-based producers.
According to NAACAM, the sector comprises a wide range of businesses with quite different levels of capacity and resources. Larger companies are often better positioned to qualify for incentive programmes like the AIS because they already meet the technical, financial, and compliance requirements.
Smaller township businesses, on the other hand, frequently lack the modern equipment, certifications, and financial records needed to be competitive.
According to NAACAM, this gap is less about the skills or talent of township manufacturers and more about access to resources and opportunities.
The association notes that without targeted support and simplified pathways, many township manufacturers will remain excluded from supply chains they have the potential to strengthen.
These barriers are felt most acutely at the operational level. Many small workshops lack computer-aided design (CAD) machines, reliable industrial equipment, and the internationally recognised safety and quality certifications demanded by Original Equipment Manufacturers (OEMs).
For Khumalo, this means that even when she produces high-quality components, she cannot sell directly to large carmakers or tier-one suppliers.
“Even if there’s an opportunity, we can’t compete because we don’t meet compliance requirements,” she said.
“It’s not that we don’t have the skills; it’s that we don’t have the resources to meet these standards.”
Global market pressures are compounding these local challenges. The recent 30% U.S. tariff on South African steel exports has disrupted supply chains, increasing costs for component producers.
A Steel and Engineering Industries Federation of Southern Africa (SEIFSA) survey found that one-third of manufacturers reported direct revenue losses from the tariffs, while another quarter cited indirect impacts such as delayed shipments and disrupted supply agreements. These shocks are hitting smaller manufacturers hardest, as they lack the capital reserves to absorb unexpected price increases.
Industry experts and business bodies are calling for bold interventions to ensure that township SMEs are not permanently locked out of the localisation drive.
Proposed solutions include shared industrial hubs equipped with advanced machinery, mentorship programmes led by established OEMs, and pre-qualified supplier panels that lower the barriers to entering the value chain. Such measures, they argue, would enable township manufacturers to scale up and meet compliance standards while also creating local jobs.
NAACAM believes that inclusion is not just a moral imperative but a business necessity.
“The localisation target is ambitious and achievable,” the association said. “But it will only succeed if it is inclusive. Township SMEs represent untapped talent and creativity and bringing them into the fold would strengthen the industry while uplifting communities.”
For Khumalo, the stakes are deeply personal. If she could access meaningful support and market opportunities, she said, her small workshop could grow rapidly and create jobs for young people in her area.
“If I had the right machinery and could get certified, I could employ ten more people within a year,” she said.
“Instead, every day feels like a battle just to keep the doors open.”
As the automotive sector prepares for a R30-billion transformation, the question is whether township manufacturers will be included in the journey or left behind.
Without deliberate efforts to integrate them into the value chain, South Africa risks reinforcing old inequalities rather than driving the equitable industrial growth the localisation strategy promises to deliver.
