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09 October 2017

Caterpillar’s largest ever Equity Equivalent Investment Programme in South Africa

First publishedon www.AggBusiness.com
Caterpillar opened a new facility

In one of its largest investments in Africa to date, Caterpillar has launched its Equity Equivalent Investment Programme (EEIP) with the South African Department of Trade and Industry (dti). Caterpillar’s EEIP commitment is to localise a cumulative ZAR1.3 billion (about US$90 million) of component content over the next 10 years, representing the largest ever EEIP in South Africa.

The EEIP is a dti initiative for multinational companies that are unable to relinquish shareholding to contribute towards their Broad-Based Black Economic Empowerment (B-BBEE) obligations. The dti’s Codes of Good Practice require that all entities operating in South Africa make a contribution towards the objectives of B-BBEE. It is, however, acknowledged that there may exist multinationals, such as Caterpillar, that have global practices preventing them from complying with the ownership element of B-BBEE through the traditional sale of shares to black South Africans.

In such instances, and provided that it can be proven that such entities don’t enter into any ownership arrangements in other countries globally, the B-BBEE codes make provision for the recognition of contributions in  lieu of such sale of equity. Such contributions are referred to as Equity Equivalent and are measurable against 25% of the value of operations in South Africa.

Caterpillar applied for participation in the EEIP with the aim of empowering local and black-owned enterprises through enterprise and supplier development. “On 21 January 2016, Caterpillar Southern Africa was granted exemption from selling equity and was instead allowed to participate in the EEIP,” said Rob Davies, South African Minister of Trade and Industry, speaking at the official launch of Caterpillar’s EEIP on 4 October 2017. “The proposed programme is aimed at contributing towards product localisation to increase the South African industrial base. The investment amount is ZAR1.3 billion, based on the 25% of the business value for Caterpillar’s South African operation,” adds Davies.

Speaking at the official launch, Zakieya Parker, Managing Director of Caterpillar Industries, said the 10-year investment will allow local, empowered South African suppliers to develop world-class capabilities and the capacity to plug into Caterpillar’s global supply chain, adding that this also opens up opportunities to regional and global markets.

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Caterpillar says the skills gap
Caterpillar says the skills gap is something the OEM is committed to tackle together with African governments

“Caterpillar welcomes the opportunity to work with the South African government to achieve economic transformation in this country. We believe our EEIP goals are closely aligned with those of the government,” says Parker.

Specifically, Caterpillar’s EEIP – which is expected to create about 3 900 direct and indirect jobs – comprises five integrated and interdependent components: local supplier and enterprise development; localisation of component content; skills transfer and development; and job creation. “Localisation opportunities we are looking at include sourcing components locally to support the mining, construction, energy and transportation industries,” says Parker, adding that Caterpillar Industries has already successfully completed its first localisation project, working with a local supplier to manufacture a mining bucket.

“We believe Caterpillar’s investment into South Africa will have a positive effect on many industries key to the economy’s industrialisation and transformation drive, including mining, quarrying, construction, paving, forestry, rail and power generation,” said Parker.

Parker adds that 2017 is a special year for Caterpillar in South Africa. The OEM celebrated Barloworld Equipment’s 90th anniversary as a Cat dealer a few weeks ago, a significant milestone considering that Caterpillar itself is 92 years old. The launch of the EEIP follows hard on the heels of yet another big investment by Caterpillar in the country. The company opened a new, state-of-the-art parts distribution facility in South Africa on August 31, which, by the way, is said to be the largest parts distribution facility in Africa.

Parker reiterates that Caterpillar’s commitment is not only about investing in physical or hard assets, but first and foremost in people. “To that end, Caterpillar will provide free, best-in-class supplier development training that is SETA-aligned for both new and existing suppliers. The first such training will be held next month, where local suppliers will get to learn about Caterpillar’s Global Production System and world-class quality standards,” she said.

Parker says the skills gap is something the OEM is committed to tackle together with governments. “We have also invested in skills development initiatives, specifically skills training. Skilled technicians are the lifeblood of all our activities. They keep our equipment running, they make our customers profitable and they keep projects on schedule.”

To help people in South Africa, and Africa at large, develop their technical skills, Caterpillar has launched a free, online technical training programme called Technicians for Africa, which already has over 700 registered users in South Africa and 3 500 in southern Africa.  The programme gives future technicians a base level of technical knowledge to make them viable candidates for careers as heavy equipment technicians and many other related fields. “We are trying to develop a talent pipeline not only for Caterpillar and our dealers, but for our customers as well,” said Parker.

These investments form part of the previously announced plan of Caterpillar, its independent dealers and the Caterpillar Foundation to invest more than $1 billion in countries throughout Africa over five years.

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