Volkswagen South Africa is building a
new eco-friendly press shop that will
maximize output of vehicles.
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• Simon Zakhele Lelaka
Volkswagen South Africa
+27 41 994 5448
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South Africa’s government and automotive industry have thrashed out the broad outlines of a long term vision to create more jobs in the sector. The government aims to create 5-million jobs by 2020, and is hoping that some of these can be channelled through the automotive manufacturing sector.
President Jacob Zuma recently paid the country’s automotive province, the Eastern Cape, a quick visit.
“The government has identified the automotive industry as a key growth sector. That is why we are here today,” said Zuma at the special gathering held at the Coega Industrial Development Zone. “We want to share ideas with the industry on how to further strengthen the sector.”
The whirlwind visit to Port Elizabeth and nearby Uitenhage on 28 September gave the president some idea of the industry’s job creation efforts and challenges, and where the government could assist with future endeavours.
Zuma was accompanied by economic development minister Ebrahim Patel, Eastern Cape Premier Noxolo Kiviet and Lakela Kaunda, the head of the private office of the president.
The Eastern Cape is South Africa’s automotive hub. It is home to four of the sector’s biggest manufacturers – Volkswagen South Africa (VWSA), General Motors South Africa and the Ford Motor Corporation, all of which are located in the Nelson Mandela Bay Municipality.
Mercedes Benz South Africa is based in Buffalo City (East London).
In addition, the region has some 80 component manufacturers which, with the vehicle companies, provide many job opportunities in the Eastern Cape. The sector has shown substantial growth in production and exports over the last decade, despite labour challenges and a tough open market system.
The industry contributes between 6% and 7% to South Africa’s GDP and makes up 12% of the country’s total exports, with 70 countries around the world importing locally made vehicles.
VWSA growing green credentials
VWSA is by far the biggest employer, representing almost 53% of the industry’s workers. At its state-of the-art plant in Uitenhage the company has invested more than R5-billion (US$634-million) in facilities over the past five years, and its latest investment shows the company’s commitment to becoming a green manufacturer.
The VWSA site is home to the most advanced and environment friendly paint shop in the country. Emissions from this new plant have been reduced by 75% compared to that of the old shop and the volume of solvents used has been reduced from eight litres to just two litres per vehicle.
The company is currently building a new press shop which will be particularly eco-friendly in terms of design and materials for its construction, with recycled aluminium used for roof and side cladding. There will also be systems for gathering rainwater and using natural light, among others.
President Zuma first visited the employee learning academy before being taken on a walkabout of the Polo and Polo Vivo production lines and the paint shop. His visit was received with much cheering and ululating from the factory workers, who downed tools to quickly smile and wave to the president.
New Growth Path for job creation
Earlier this year, Zuma indicated in his State of the Nation address that 2011 will be the year of job creation. In 2010 he announced the country’s New Growth Path, a plan for the government’s creation of 5-million jobs by 2020.
At the time the government identified the six sectors that could provide new jobs: infrastructure, agriculture, mining, tourism, green energy and manufacturing.
Zuma told automotive representatives that there are currently 64 000 more jobs in the economy than there were a year ago but that the growth rate is still substantially lower than that achieved in 2008. The group affected the most by unemployment, which stands at around 25% countrywide, was the youth sector. This makes up 30% of the employment force, yet suffered 60% of job losses.
Zuma affirmed that the government will continue to maintain its infrastructure expenditure programme, which includes the Port of Ngqura and the Coega IDZ, developed at a cost in excess of R10-billion ($1.3-billion).
Public employment schemes and other government job creation initiatives will continue, he added, but the long term aim is to turn to strong sectors such as the manufacturing and automotive industries to boost the economy.
Zuma said that the country should take advantage of an industry which has such a strong competitive advantage over the rest of the world. Through the Industrial Development Corporation some R102-billion ($13-million) in funding will be available over the next five years, he said.
“Job creation is a collective effort,” said Zuma. “The government will play its part and provide the necessary incentives to boost the industry, which in turn should contribute to skills development and training.”
Through the Automotive Production Development Plan (APDP), said Zuma, it is hoped that vehicle production can be increased from the 550 000 units per annum currently produced to 1.2-million by 2020. The APDP came into effect in 2008 and is aimed at stimulating local content production and exports through various tariffs and allowances.
The automotive perspective
David Powels, MD for VWSA, gave a brief overview of the industry over the last decade. During this period, he said, there was stable growth in productivity, units manufactured and exports.
But despite these statistics and government interventions, South Africa’s contribution to the world market is less than 1%, said Powels.
He sketched a sobering picture of competition in the global market, with some 60 competitors worldwide and 1 300 different vehicle models available.
“We are still in a situation where we are not really globally competitive, functioning in a small but intensely competitive market.”
Powels is also chairperson of the National Association of Automobile Manufacturers of South Africa (Naamsa). He highlighted a few of the association’s concerns, such as the creation of a stable labour relations environment, which will contribute towards pushing up productivity levels; setting up free-trade agreements with sub-Saharan Africa; and increasing the local content.
Concerns over logistics and infrastructure support such as rail, ports and electricity supply were also raised and the fact that South Africa still manufactures EU 2 level fuels whereas the global market is already on EU 5 fuels. These terms refer to emission standards for vehicles, laid down by the European Union.
The issue of preferential procurement were raised by Stewart Jennings of Naacam, the Authority of the South African Automotive Components Industry. Jennings said: “South Africa is not always as loyal to South African products as they should be as a result of the country’s open, free-market system.”
Despite this, the component industry remains robust, investing R8-billion ($1.02-billion) over the last three years and showing an employment rate up by 5%.
The lack of skills and the unstable labour market, as well as the volatility of the rand was also cited by Jennings as points for concern. Despite these issues, Jennings said the industry remained optimistic and was looking forward to forging closer relations with the government.
“The motor industry has been an incredible success story in South Africa,” he said. “We want to grow a much closer alignment with government, especially going forward with the APDP.”