Monday, 11 July 2016

A success story in a plagued manufacturing industry

A success story in a plagued manufacturing industryThe whole world is being bombarded by depressing stories of South Africa going through difficult economic situation. Lately with the petrol price increases, which economists accentuate has repercussions on consumers, and the pending investment rating agencies announcements. Among these negative stories, we often overlook the positive ones that evidently show that South Africa is an attractive investment destination. South Africa’s automotive sector is a success story in a plagued manufacturing industry. The reality is that South Africa continues to fascinate large investment with foremost global multinational firms investing billions of Rands in the economy. Amongst the most distinguished are investments in the automotive manufacturing sector.


Initiatives Undertaken
Trade and Industry Minister Dr Rob Davies credited the success of this sector, in part, to the country’s longterm policy certainty and incentives established under the Industrial Policy Action plan (Ipap), which was now in its eighth iteration. The South African government through the Department of Trade and Industry (DTI) has taken a mindful decision to support the automotive sector as it is important for the economy and job creation. To boost investment, the department implemented a number of initiatives such as the Industrial Policy Action Plan and the Automotive Production and Development Programme.


“We are in a much better position now than what we would have been without the Ipap implementation,” he told media on the sidelines of the Manufacturing Indaba on Tuesday. “We may not even have [had] an automotive industry [without it],” he added, stating that policy inevitability had permitted South Africa’s automotive industry to avoid the same fate as Australia’s automotive industry, where all production was set to cease in 2017. Further, the success of the Automotive Production and Development Programme (APDP) could provide a template for the Department of Trade and Industry’s (DTI’s) future incentive programmes in other sectors.


Since the launch of the Automotive Investment Scheme (AIS) in 2010, the government’s support of R7.8 billion has leveraged investment of more than R28.5 billion in the automotive sector. This investment paid off with the South African automotive industry’s export earnings for 2015 reaching the R150 billion, up from R115.7 billion accomplished the previous year. In terms of vehicle exports this growth in translated to 333 802 units exported last year, presenting a 21.4 per cent growth from 2014.


Industrialization is a critical part of its Nine-Point Plan which aims to ignite economic growth and create jobs. To be able to implement this plan, the government has invested heavily in infrastructure development. Our Infrastructure Development Plan does not only aim to redress the wrongs of the past, but will also help us unlock the economic potential of the country and region for decades to come.


Creating Job Opportunities
Recently Toyota invested R6.1 billion in its new Toyota Hilux and Fortuner manufacturing plant in Prospecton, Durban. This was the biggest single investment Toyota has made to date. It will support more than 4000 jobs with the total employment at the plant surpassing 8000 jobs. As a direct result, Toyota’s suppliers invested more than R 1.7 billion, which will create as many as 2000 new jobs. It also led to five new international suppliers coming to our shores. Toyota Chief Executive Andrew Kirby confirms its commitment to South Africa, saying: “This latest announcement gives evidence of a company that is committed to South Africa by strategically investing in the people, tools and equipment to produce cars and commercial vehicles of world-class standard that are not only destined for the domestic market, but will also fly our flag high on the international stage thanks to a robust export plan.”


BMW is another automotive manufacturer that continues to increase its investments in the country. As part of a larger R6 billion investment, BMW recently started with the construction of a new state-of-the art Bodyshop in Rosslyn outside Pretoria. The Plant Director Stefan Huelsenberg spoke about the opportunities the Bodyshop will create, saying: “This expansion will result in an increase in the number of employees in the new bodyshop, and the increased robotics will allow us to empower employees with new skills to run these new technologies.”

The reality is that South Africa continues to fascinate large investment with foremost global multinational firms investing billions of Rands in the economy.


Another manufacturer which is investing in South Africa is the Volkswagen Group. It has allocated R4.5 billion for new models and infrastructure at its Uitenhage factory by next year. To support its development plans at the Silverton assembly plant in Pretoria, Ford Motor Company of Southern Africa will invest R2.5bn to produce the all-new Ford Everest range. The investment is set to create about 1 200 new jobs. Ford Executive Vice-President Jim Farley said: “When your plant gets a new vehicle, it’s a really big deal and it’s a solid vote of confidence in our team and in South Africa as a whole.” In another development, Beijing Automobile International Corporation, China’s fifth-largest car manufacturer, proclaimed in December that it will invest R11 billion in a completely knocked down vehicle manufacturing plant in South Africa. The investment will create about 2500 direct jobs and 7500 indirect jobs.

These are all enormously positive developments, which evidently establish the confidence investors have in the local economy regardless of the present difficult economic conditions. South Africa, like the rest of the world, is still struggling in the aftermath of the global economic crisis of 2008. This crisis caused a global slump in demand and lower production volumes, which endangered the existence of some of the major automotive producers internationally. Read more....

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