Automotive sector investments show SA still has appeal

Thursday, June 2, 2016

By Minister of Trade and Industry Rob Davies

Hardly a day goes by without South Africans being bombarded by stories dealing with the difficult economic situation. Recently with the petrol price increases, which economists emphasise has implications on consumers, and the pending investment rating agencies announcements.

Among these negative stories, we often overlook the positive ones that clearly show that South Africa is an attractive investment destination.

The reality is that South Africa continues to attract large investment with leading global multinational firms investing billions of rands in our economy. Among the most notable are investments in the automotive manufacturing sector.

New jobs

Toyota recently 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 4 000 jobs with the total employment at the plant exceeding 8 000 jobs.

As a direct result, Toyota’s suppliers invested more than R1, 7 billion, which will create as many as 2 000 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."

Another manufacturer which is investing in South Africa, is the Volkswagen Group.  It has earmarked R4.5 billion for new models and infrastructure at its Uitenhage factory by next year.

To support its expansion 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.”

We are also thrilled about Volvo investing R60 million in a regional parts and distribution centre in Benoni, Ekurhuleni. This is an addition to Volvo opening a Competence Development Centre at its headquarters in Boksburg in November last year.

In another development, Beijing Automobile International Corporation, China’s fifth-largest car manufacturer, announced in December that it will invest R11 billion in a completely knocked down vehicle manufacturing plant in South Africa. The investment will create about 2 500 direct jobs and 7 500 indirect jobs.

These are all extremely positive developments, which clearly demonstrate the confidence investors have in the local economy despite the current 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 threatened the existence of some of the major automotive producers internationally.

Initiatives

The government through the Department of Trade and Industry (dti) has taken a conscious decision to support the automotive sector as it is critical for the economy and job creation. To encourage investment, the department implemented a number of initiatives such as the Industrial Policy Action Plan and the Automotive Production and Development Programme.

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 achieved the previous year. In terms of vehicle exports this growth in translated to 333 802 units exported last year, showing a 21,4 per cent growth from 2014.

Industrialisation is a critical part of our 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. 

Our work to grow South Africa’s investment profile and develop the necessary infrastructure that makes us a prime investment destination and places us in a strong position to take advantage of any recovery in the global economy.

As government, we have set a target of 1.2 million cars to be produced in South Africa by 2020. Every investment brings us closer to that target. We will continue to work with automotive investors to ensure we create a conducive environment for them to grow their businesses.

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