Labour instability is a potential handbrake to further investment by the Ford Motor Company in the expansion of its manufacturing capacity in South Africa as its seeks to take advantage of growth opportunities in Africa.
Stephen Odell, the executive vice-president for Europe, the Middle East and Africa, said this week that Ford had created a stand-alone Middle East and Africa business from the beginning of this year because this was a growth area in terms of population, wealth creation and wealth spread.
He said Ford wanted to be part of this growth and its South African manufacturing operations, its only plant in the region, was an anchor for this new business unit.
Decisions had to be taken about what products would be brought to the region and whence they would be sourced, he said, but clearly “there are sourcing opportunities” because a region’s requirements were normally sourced from within that region.
“There is an opportunity to consider South Africa in that pot of decisions,” he noted.
However, Odell said the automotive manufacturing and other industries were looking at the implications of the labour issues evolving and continuing in South Africa because businesses needed a stable environment.
He stressed that Ford was not ready to comment on when it would take any decision on where it would build products for the new region.
BMW South Africa said last year that it had been removed as a bidder for the production of a new model because of the strikes in the country’s automotive sector.
Jeff Nemeth, the president and chief executive of Ford Motor Company of Southern Africa, said it needed to continue to leverage its capital, human capital and supply base to continuously improve productivity and quality to ensure it was “top of mind” when the board of US-based Ford was making investment decisions.
He said Ford SA had a good relationship with its local union but there was a need to focus on a continuing drive for stability throughout the labour market.
He said Ford SA was pleased that Labour Minister Mildred Oliphant had announced a labour indaba to be held in June or July because it showed the government recognised the need for stability to attract foreign investment.
These comments follow an eight-week disruption to production in the motor manufacturing industry last year caused by back-to-back strikes in the motor manufacturing, motor retail and automotive component manufacturing, and vehicle transport sectors.
Jim Benintende, the president of Ford Middle East and Africa, said the company was projecting growth in sales in the new region to 220 000 units this year from about 200 000 units last year. He said South Africa and its prominence in the new business unit made it “a real gem” within the Middle East and Africa region.
South Africa is Ford’s second-largest volume market in the region after Saudi Arabia.
Odell said there was an opportunity for the automotive supply base in South Africa to localise more, even with the volume of vehicles being produced now by domestic original equipment manufacturers. This would reduce costs and remove some of the risk associated with the exchange rate of the rand.
Nemeth admitted that there were other concerns related to potential investments in South Africa apart from labour.
He said the harbours were some of the most expensive in the world and there had been talk of another steep increase in port tariffs.