2011 is poised to be a stellar year for Ukuvula Automotive Investment Holdings. Executive director of the automotive division Achmat Mohamed brings Jayne Alverca up to speed with the latest developments.
In the Xhosa language, ukuvula means ‘to open up’ within the context of being receptive to new opportunities, challenges or worlds—and Ukuvula Automotive Investment Holdings has met the challenges of political and economic reform within South Africa head-on. The investment group’s track record over the past decade has carried it at the forefront of the Black Economic Empowerment movement within the country.
Ukuvula now counts as the Eastern Cape’s leading black-owned investment holding company, with the automotive component manufacturing sector its main focus. Over the past five years Ukuvula has invested R335 million in the sector—its automotive business now accounts for 48 per cent of all investment and last year achieved a turnover of R400million.
Since its original formation as Ilithe Technologies in the 1990s—Ukuvula Investment Holdings (Pty) Ltd was created in July 2007 following the merger of Ukuvula Investments and the Ilithe Group—advanced technology has been a key element of the business. That, combined with Ukuvula’s unique blend of creative and strategic thinking and a commitment to the highest standards of corporate governance, has led to relationships with virtually every major automotive OEM within South Africa.
Four companies make up the automotive division of the group, and all are deeply embedded as Tier 1 or Tier 2 suppliers. SA Die & Pattern Company, located in Isando in Gauteng, works principally with the South African OEMs to supply pressed partsincluding sub-assembly components for body and interior applications. Acoustex, in Port Elizabeth, is a Tier 1 supplier of sound deadening and other related component parts direct to OEMs like BMW, General Motors South Africa (GMSA) and Toyota. Acoustex Trim, located in the Coega IDZ in Port Elizabeth, supplies moulded carpets, foam-in place headrests and plastic injection moulded components to customers such as VWSA, GMSA, Lear and Johnson Controls. Lastly, there is Zealous Holdings, the latest addition to the portfolio, which brought in a customer base including Amalgamated Appliances, VW, Robert Bosch, DEFY, Ford, Lemforder, BMW and Ziton.
Inevitably, the global downturn had a negative impact on demand, but Ukuvula actually managed to grow during the downturn through the propitious addition of Zealous Holdings. The company operates a zinc and aluminum die casting plant to the ISO 9002 – TS16949 standard and since 1970 has been recognised as South Africa’s largest high pressure die casting producer.
But now the automotive division is witnessing its most significant expansion to date, largely as a result of a contract with Ford to supply the highly acclaimed new ‘one tonner’, the T6. The expansion will take the company from four manufacturing sites to six and is expected to release many new synergies within the Ukuvula portfolio.
“This is a time of tremendous growth for us. In response to new work to supply the Ford T6, we have significantly increased the footprint of our stamping business, which has enabled us to acquire another stamping plant in KwaZulu Natal under the auspices of SA Die,” explains executive director Achmat Mohamed. “The SA Die name is so well known as a quality pressed parts supplier that we want to build on its strengths as much as possible.”
Final completion of the due diligence process is imminent and Mohamed expects to take ownership of the business assets in March. The acquisition will also benefit Ukuvula’s relationship with Toyota: all Toyota business will shift to the new plant in KwaZulu Natal, as it enjoys much closer proximity to Toyota’s own facility. Toyota, in common with virtually all major OEMs, wants as many suppliers as possible clustered in the vicinity to facilitate just-in-time delivery.
Meanwhile, Ukuvula has begun commissioning a greenfield site in Pretoria adjacent to Ford South Africa. When operational in August 2011, the site will then supply parts for the T6.
Mohamed explains that the acquisition of two additional manufacturing sites has incentivised an overarching review to capitalise on synergies within the business. He sees a clear opportunity to increase product flow by identifying additional product needs within the existing customer base that could now be fulfilled by Ukuvula. He also believes there are further synergies to be found in logistics and supply chain management, particularly between the two plants located in Port Elizabeth. “All of our plants are gearing up to meet acceleration in demand and we have to ensure that we are prepared for the increase,” he says. “Overall domestic production is set to increase by 15 to 17 per cent this year compared with 2010 volumes.
“We are starting to see more activity in the buyer’s market and a slow increase in employment,” he continues. “That, combined with the lowest interest rates South Africa has witnessed for many years, is slowly driving up domestic demand. However, the key driver behind the growth of South Africa’s automotive business is the export markets, with Toyota, Mercedes, Volkswagen and BMW the current dominant players.”
Mohamed anticipates that demand will grow steadily for the next three or four years, hitting the heavy volumes achieved in 2008 around 2013, before then falling away again. His key objective, meanwhile, is to ensure that Ukuvula remains a major supplier on high volume lines. “We have already achieved this objective with VW, General Motors and Toyota; and from now on we will be working much more closely with Ford. We expect to be beneficiary of the BMW 3 replacement series due to be launched in the last quarter of 2012; and we are in close talks with Nissan on their future plans in South Africa.”
The realisation of Mohamed’s ultimate vision for the group will come in two or three years’ time. “We want to continue to grow our business so that we can consider a listing on the Johannesburg Stock Exchange or Alternative Exchange some time late in 2012 or 2013. That will be the final justification for all our efforts,” he concludes.
