This year it was announced that the Everest SUV would be produced by the Ford Silverton plant. BMW and Nissan are also both manufacturing at Rosslyn
In November last year BMW announced a R6-billion investment in its Rosslyn plant, which forms part of the Automotive Industry Development Centre (AIDC).
During the same period, Nissan Motors announced plans to build a new model of pickup at their plant, also in Rosslyn. This is set to commence in 2018 with an estimated production output of 40 000 vehicles per annum, says AIDC chief executive Dr David Masondo.
In April 2016, Ford South Africa announced it would begin production of the Everest SUV at its Silverton plant. This came just five years after the company announced the completion of R3.4 billion in investment at its assembly plant, to enable it to produce and export its new Ranger pickup to 148 countries, mostly in Africa and Europe.
“All these collaborations are aimed at retaining these entities as key contributors to job creation, GDP growth and exports,” says Masondo. “The collaborative ventures vary between the three entities, while also involving a whole range of automotive component suppliers. The exact details of the collaborative ventures are subject to confidentiality.”
As part of efforts to support the sector, government has introduced the Automotive Production and Development Programme, which aims to among others to support and develop the industry through maintaining stable import tariffs, affording manufacturers a vehicle assembly allowance, a production incentive and an automotive investment scheme.
To illustrate the significant role played by the province in the sector, Masondo highlights that in 2011, 22.5% of vehicles exported from South Africa were assembled in Gauteng. The figure rose by more than 10% in 2015 to 33.6%.
Masondo says this was driven by the increased export volumes of Gauteng-based original equipment manufacturers such as BMW and Ford.
Nissan South Africa manufactures the Nissan NP300 Hardbody, and the NP200 half-ton pickup at its Rosslyn plant. Masondo says the Ford South Africa manufacturing plant in Silverton currently produces the Ford Ranger, the Everest and the Mazda BT-50. It employs 2 873 staff and that the investment increased the annual capacity to 110 000 vehicles per annum.
“Since the 2011 investment, Ford SA has seen strong production growth at its Silverton plant. Production has increased from 28 716 vehicles in 2011 to 72 398 vehicles by 2015.”
Masondo says from 1998, BMW has increased its local production volume by 220%. “In 2002, the BMW Group embarked on a major inward investment at the Rosslyn Plant, increasing capacity to 60 000 units per annum.
“Between 1998 and 2005, 75% of the 270 000 BMW 3-series vehicles produced at the plant were exported. Between 2005 and 2012, the plant produced the fifth-generation 3 Series, manufacturing a total of 342 000 cars. By 2014, production reached 68 721 vehicles annually, and was expected to exceed 70 000 vehicles in 2015. These vehicles are exported to eight countries globally, namely Australia, Taiwan, New Zealand, Hong Kong, Singapore, Japan, the US and Canada.”
In addition, the AIDC and Japan International Cooperation Agency (Jica), says Masondo, “have collaborated on a programme to dispatch automotive experts from Japan to South Africa, to provide technical expertise and training to develop local automotive manufacturing companies”.
He says the AIDC has vast experience in Supplier and Enterprise Development programmes, and has been working closely with Jica to develop and implement programmes addressing the needs of the local manufacturing industry.
“The programme has increased the competitiveness of the automotive local manufacturers such as Allite Excalibur, Feltex Trim Rosslyn, Feltex Trim Durban and Duys Component Manufacturers. These companies have improved business efficiency and productivity through adopting lean manufacturing techniques; and enhanced use of technology.”
Driving investment in a time of economic turmoil and uncertainty
Gauteng is defying the gloom of the global economic meltdown that has led to slow growth and investment in most parts of the world.
But Koketso Tamale, chief executive of the Gauteng Investment Centre (GIC) — who has the daunting responsibility of attracting investment to the province — says the local economy is upbeat.
“Even as many indictors of globalisation continue to stagnate, global FDI [foreign direct investment] flows into Gauteng and South Africa are still very strong,” she says.
Located in Sandton, the affluent business hub dubbed “the richest square mile in Africa”, the GIC’s main goal “is to make Gauteng become the preferred location for investment”. A subsidiary of the Gauteng Growth and Development Agency [GGDA], the GIC is also tasked with “the responsibility to provide an investment and export facilitation mechanism where relevant organs of state and state entities or agencies are brought to one location, co-ordinated and streamlined to provide prompt, efficient and transparent services to investors and exporters”.
Tamale says global business executives are united in the view that FDI will become increasingly important to corporate profitability and competitiveness in the near medium term. “Given the size of the Gauteng economy and the above national economic growth rate of the province, investors continue to select Gauteng as a location for new and expansion investments,” she says.
Tamale points out that Gauteng is preferred by investors for the size of its economy, market share, good infrastructure, availability, educated workforce and ability of sourcing input within the province, among other factors.
The International Monetary Fund’s Regional Economic Outlook for Sub Saharan Africa survey published in October forecasts a gloomy picture for the region: “Economic growth in sub-Saharan Africa this year is set to drop to its lowest level in more than 20 years, reflecting the adverse external environment, and a lacklustre policy response in many countries.”
Delivering his mid-term budget in Parliament last month, Minister of Finance Pravin Gordhan also cautioned about slow national economic growth: “Global growth has slowed, affecting investment and trade in many developing economies. Our economic growth will be just 0.5% this year, rising to 1.7% in 2017. If we do the right things to support investment and confidence, our economic recovery will be more rapid.”
But in a time of adversity and uncertainty, hard-nosed businesspeople often see opportunities where others see only disaster. “Serious investors look at opportunities, including the ones [that come] out of bad stories,” Tamale says, explaining why the GIC still manages to attract investment to Gauteng even during such uncertain times.
“And if they see the economic viability for business they still invest. The secret resides in the selection and identification of sectors, and the ones that have the capability of contributing to the economy of Gauteng and [that] generate work opportunities,” she says.
Tamale says the fact that Gauteng’s export trade forms an impressive 64% of all the country’s exports is because “export trade is at the heart of our [GIC] manufacturing and industrial development agenda”.
About 42% of the export trade from Gauteng comprises manufactured products, says Tamale: mainly chemicals, auto, consumer products, and capital equipment.
“Besides, a lot of the businesses in the manufacturing sector are small, medium and micro enterprises [SMMEs), which contribute significantly to employment creation and innovation. Hence, export trade is also important for our enterprise development, where the GGDA has formed partnerships with mainstream businesses and GEP [Gauteng Enterprise Propeller] to increase the performance of the sector through funding, clustering and skills development,” she says.
In August Bloomberg said that the rand gained more than 16% against the US currency since the start of 2016, while in contrast, Africa’s first ranked economy — Nigeria’s naira — lost more than a third of its value.
With intra-African trade top of the GGDA and GIC agenda, such developments mean just more than numbers. Tamale says the implication for Gauteng is that the GGDA now has to look for niche markets both in Africa and outside the continent.
“Hence, in Africa we aim to maintain our dominance in the manufacture and supply of capital equipment, increase manufacture and sale of agro-processed products to address food insecurity on the continent, increase our trade diplomacy in emerging growth areas such as Cote d’Ivore, Kenya, Rwanda, Uganda, Ethiopia and of course maintain our trade engagements with the SADC countries,” she says.
Across the seas, says Tamale, the GGDA is looking at countries that are at least faring well in the gloomy global economic environment. “Countries such as US, UK, Germany, Italy, Spain, India and China are important for our trade agenda,” she says.
Although the South African economy is currently performing better than that of Nigeria, Tamale warns: “As a matter of fact, the rankings of countries per GDP performance in 2016 will only be known after the release of the 4th quarter data in April 2017. Currently SA remains third largest economy in Africa with a GDP of $322.9, after Egypt ($330.77) and Nigeria ($490.2).”
The GIC is also working to assist the SMME sector; through its investment and trade unit, the GGDA has developed a programme to assist SMMEs to become part of mainstream exporting.
“The export development programme is to ensure that their produce is able to meet the international standard over the years, [and] this has proven to be a success as they are introduced into new markets and are able to partner with big companies locally to satisfy the orders they receive,” says Tamale.
She says by ensuring that foreign investors utilise local businesses and products that are in line with their requirements, “those SMME’s develop in all areas of business and automatically are empowered and grow the economy”.
“When facilitating FDI projects into Gauteng, the GGDA always creates business linkages between large companies and local small firms. We also work very closely with our sister agency the GEP, which has the mandate to provide both financial and non-financial support to SMMEs.”
The GIC’s location in richest square mile in Africa is also quite strategic and eases the burden on businesspeople, as many vital amenities are within close proximity of each other. Tamale says the GIC one-stop shop, which is located between the US Embassy and the Apple store in Sandton Drive, “aims to make it quick and easy to do business in the province”.
“We facilitate and walk the path with you, as you grow and expand your business, be it identifying turnkey projects, or looking for a suitable site for your factory. Our task is to help businesses grow and progress. The size of your business doesn’t matter, nor the sector,” she says.
“For starters, the location — chosen specifically for its proximity to the Sandton business district — another [is] the Visa Facilitation Services Centre (VFS) for international business representatives and work permits, which offers a fast turnaround for visa applications; and then there are the growing numbers of visitors and representatives looking to do business in Gauteng. Key to our success has been the buy-in from our partners, who are located and have offices within the centre.”
She cites for instance, the example that “if you have a tax issue, Sars [South African Revenue Service] is on site to assist; if you are having municipal problems, the City of Joburg (CoJ) is at hand.”
Other partners are Ernst and Young, the department of trade and industry, Mercantile Bank of Portugal, Brand South Africa, and the departments of agriculture and rural development.
“Business[es] invest where they can generate profit and that can be related to easy access to logistics, number of people as clients, workforce and skills availability. The GGDA/GIC also assists in the facilitation [of development opportunities] to other provinces [that have] specific business demand[s] by using our counterparts or sister agencies; our main goal remains South Africa.”