South African automotive components manufacturer Malben Engineering has signed an agreement with Egypt’s Elaraby Group, opening the way for the possible creation of a new venture to manufacture automotive components in the North African country.

The memorandum of understanding was initialled on the sidelines of the Africa Automotive Investment Forum, which took place in Alamein in early October and was attended by key African policymakers, original-equipment manufacturers (OEMs), investors, financiers and industrialists.

The agreement, which follows initial meetings facilitated by the African Association of Automotive Manufacturers, proposes to combine Malben Engineering’s established automotive manufacturing expertise with Elaraby Group’s extensive domestic industrial capability.

Established in Nigel in 1974, Malben Engineering has more than five decades of experience in supplying stampings and complex welded assemblies to leading OEMs operating in South Africa, including Ford Motor Company, BMW, Fiat, Alfa Romeo and Volkswagen.

The highly diversified Elaraby Group, meanwhile, operates through 16 companies spanning commercial, industrial, medical and service activities and employs more than 36 000 people in Egypt and the Middle East.

“Partnering with an established Egyptian industrial group could materially shorten Malben’s route to market and provide access to existing manufacturing capacity, people, administrative systems, procurement capability and local supplier relationships, avoiding many of the challenges associated with a greenfield startup,” Malben Engineering operational director Luca Smargiasso explains.

The Elaraby Group will contribute its established Egyptian industrial footprint, local operating capability, market knowledge and relationships.

The fact that both companies are family-owned businesses has also been cited as a factor in facilitating the relationship, with the Elaraby Group involving third-generation family members and Malben Engineering remaining a second-generation family enterprise, 52 years after its founding.

“As the partnership develops, the parties intend to explore joint investment opportunities in new facilities and capabilities serving Egypt's automotive industry, with the potential to support wider regional supply opportunities,” Smargiasso explains.

Technical director Marco Smargiasso adds that the proposed partnership is also aligned with Egypt’s National Automotive Industry Development Programme, which is designed to localise and deepen automotive manufacturing and develop the supporting components industry.

The framework links incentives to measurable outcomes, including local content, production volumes, investment and exports, and has some parallels with South Africa’s Automotive Production Development Programme.

There is also a longer-term opportunity to develop competitive African automotive supply chains through which components and manufacturing capability can increasingly be sourced within the continent rather than imported from outside Africa.

“As that capability develops, the African Continental Free Trade Agreement creates the potential to serve OEMs and automotive markets across the continent, subject to the applicable rules of origin and market-access requirements,” Smargiasso adds.

However, commercial director Marius Schafer says the immediate priority is to establish a competitive and sustainable operation in Egypt.