The Localisation Support Fund (LSF) has released its ‘South African Bus Manufacturing Industry Development Study’, which shows that enforcing existing local content requirements, group municipal buying and targeted incentives can lift local content from about one-third of each bus to as much as 50%.

Prepared by professional services firm Ernst & Young in collaboration with industry organisation naamsa | The Automotive Business Council, the study states that South Africa’s bus industry does not need new policy to thrive, but needs the rules that already exist to be applied consistently.

“The foundations are already in place, namely bus-body builders, vehicle makers and local content requirements. What has been missing is predictability in procurement and consistent enforcement of the rules we already have. Get that right and more of the value of every bus South Africa buys can stay at home,” says LSF CEO Irshaad Kathrada.

The South African transport sector buys about 1 000 new buses a year. Yearly bus sales fell from 1 099 in 2017 to 665 in 2021 and recovered to 945 in 2024, which remains below what the industry’s capacity allows.

The study identifies four causes for this situation, namely fragmented procurement, local content requirements that are applied unevenly across tenders, electric and hybrid buses that fall outside those requirements, and fully built imports that are entering the market while local assembly is available.

South Africa has strong local body- building capability, with local content in bus bodies typically between 70% and 90% by value. However, imports account for 60% to 70% of the value of a complete bus, which mainly includes chassis, drive-trains and electronics, the study says.

The study modelled different policy and local-content scenarios, with the current level of local content being about 32% to 35%. Each 1% increase in local content is predicted to add about R1-billion to GDP and support about 325 full-time jobs.

The study does estimate that higher local content comes at a price and would add about R300 000 to the cost of a bus in the 40% to 50% local-content scenario.

However, the model also shows that this is outweighed by the benefits. Pooling municipal purchases could cut capital costs by 10% to 15%, and fares could fall by 50c to R1 a trip.

The benefit-cost ratio stays above one in every local-content threshold scenario tested by the study, meaning commuter savings alone exceed the fiscal cost of the incentives, the study states.

Specifically, one of the four recommendations made by the study is to tailor incentives to drive increases in local content.

South Africa should extend the volume assembly localisation allowance to buses at about 250 units a year through an adjustment to the Automotive Production Development Programme Phase 2 (APDP2), it recommends.

Further, the study also identifies specific components where local capacity already exists or could be deepened, including batteries, wiring harnesses, automotive glass, tyres, seats, fuel tanks and wheel rims.

Meanwhile, another recommendation is for South Africa to enforce and extend local-content requirements.

The threshold for diesel bus bodies should be raised to 85%, and electric and hybrid bus bodies should also be brought into this framework over five years, supported by standard tender fields and tighter checks on fully-built imports.

Additionally, the study advises buying together, with smaller municipalities grouped into buyer clusters, while large metros continue to procure independently.

The study also recommends that the bus manufacturing industry grow with the region, use the African Continental Free Trade Area rules of origin and build regional value chains that bring more of South Africa’s African trading partners into the value pool, so that regional demand adds scale for everyone in the chain.