Should South Africa concentrate on being a niche automotive manufacturer or try to be a global player? That was the question posed by Johan Cloete at Tuesday’s Made in South Africa Automotive Conference 2004 in Port Elizabeth.
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“We must recognise that we are not going to be a big player. Global capacity keeps growing – five years ago everyone was talking about Brazil and a lot of investment went there. Now it’s China,” said Cloete, a South African automotive industry consultant.
SA is part of the Middle East and Africa and there is promising growth forecast for the region. The SA industry had various options. It could produce low cost cars for South Africa – standard car with content stripped out. It could allow imports with low tariffs, making cars more affordable, or does the country go back to high tariff barriers and protectionism which doesn’t make it globally competitive.
There was also the option of pushing to become the Detroit of the southern hemisphere. “But to do that we would be competing against Brazil”.
Coete told more than 150 delegates at the conference that concentrating on niche products had many attractions. Plants of the seven manufacturers already based in SA could become “mother” factories for the models produced. This would mean building one model that was produced nowhere else in the world, attracting the Tier 0.5 and Tier 1 component suppliers that the whole SA auto industry needed.
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By GlobalDataHis vision was that the Tier 0.5 suppliers would be based within the factory with Tier 1 suppliers located very close within supplier parks while existing Tier 2 and Tier 3 suppliers would also be close, but not necessarily within the supplier parks.
“We could do much more as an industry together but we also need the government to do more by targeting the existing automotive industry training funds better – we need to take workers from here and place them in globally competitive facilities overseas so that they learn best practices and bring that learning back to South Africa,” said Coete.
But there were other problems, made worse by an uncompetitive raw material supply chain.
Those problems were highlighted by Goolam Ballim, senior treasury economist, Standard Bank of South Africa, who told the conference that the private sector, which accounted for 80% of SA’s GDP, was disappointing in the way it failed to invest to provide employment opportunities. “Private companies are not bringing the fresh skills to the market that we need. This will be a key issue for the second decade of democracy.”
There was also a major problem with the quality of the data on employment figures.
The government’s “blanket approach” to creating jobs with R50 billion labour-intensive public works spending over the next five years was welcome but it wasn’t providing the long-term employment that was needed although it would provide some people with the skills needed to come into mainstream employment.
Ballim said he was encouraged by the “peace dividend” that SA was enjoying, reminiscent to that which helped boost the US economy in the early 1990s after the end of the Cold War.
But he warned that the exclusion of the poor was still the greatest risk to SA’s economy. Again, though, there were signs of improvement. Water supply was a metaphor for measuring that improvement. “In rural areas we have moved from people taking water from rivers to having a tap within 200 metre of their homes. Now those taps are being moved indoors.”
The country was also addressing its infrastructure issues, badly neglected before 1994. “Our spending on roads, railways and ports might seem too late, but it should help make the auto industry here more competitive,” he said.
Nceba Faku, mayor of the Nelson Mandela Bay Metropolitan District, told delegates that the new deep water port being developed by Coega, the conference sponsors, was of huge strategic value to the auto industry.
“Possibly the largest infrastructure project in Africa, the new deep water Port of Ngqura – due to receive its first commercial vessel in September 2005 – will ease the auto industry’s logistical problems experienced at other local ports.
“Coega will also provide an ideal location as a transit point for shipments passing between the Far East, Europe and the emerging markets of South America.
The mayor also promised that the various organisations within the Nelson Mandela Bay Metropole would collaborate and co-ordinate its activities in support of the automotive industry in order to maximise impact. “Even where the Metropole is best positioned to initiate and take the leading role, the approach should be as inclusive as possible,” he said.
