Caterpillar to localise components as part of R1.3bn empowerment deal

05 October 2017

US capital equipment giant Caterpillar has announced an equity-equivalent investment programme in South Africa aimed at improving its black-empowerment rating by localising R1.3-billion-worth of components used in the construction and miningequipment it sells domestically through Barloworld Equipment.

The investment commitment, unveiled in Johannesburg, presided over by Trade and Industry Minister Dr Rob Davies, will be implemented over a ten-year period.

It is the ninth equity-equivalent investment deal announced under South Africa’s broad-based black economic empowerment (BBBEE) legislation, which allows multinationals to earn ownership credit without actually selling shares to black shareholders.

Caterpillar Industries MD Zakieya Parker described its largest-ever equity-equivalent investment concluded to date and also one of US group’s largest investments in Africa.

Caterpillar has been present in the South African market for 90 years, having first signed a dealership agreement with Charles ‘Punch’ Barlow on August 17, 1927.

The Caterpillar transaction could provide a template for those automotive original-equipment manufacturers (OEMs) seeking to improve their empowerment ratings, after government announced that it would be phasing in a stipulation that all recipients of government incentives have a minimum BBBEE rating of Level 4.

Parker indicated that Caterpillar would seek to localise various components used in equipment sold to the mining, construction, energy and transportation industries. She revealed that Caterpillar Industries had already successfully completed its first localisation project, working with a local supplier to manufacture mining buckets.

“The multi-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. This opens up export opportunities to regional and global markets,” Parker said.

Selected component suppliers would need to be black owned and meet the US group’s exacting quality standards.

Barloworld EquipmentSouthern Africa CEO Emmy Leeka said the deal would also assist the JSE-listed group in consolidating its own empowerment credentials, which currently stood at Level 3.  Caterpillar’s commitment would assist it in securing a Level 1 rating in future.

The commitment would be monitored and enforced by the DTI’s own empowerment unit as well as the BBBEE Commission, which has been mandated to deal with allegations of compliance transgression or fronting. 

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