Unstable input costs, labour forces and industrial policies in South Africa might make it harder for domestic motor manufacturers to obtain approval from their parent firms for large new investments in the country, Ford Motor Company of Southern Africa president and chief executive Jeff Nemeth said.
Nemeth also stressed the need for a strong push by South Africa for free trade alliances with trading blocs in Africa “to really solidify South Africa’s position as a gateway into Africa”.
The labour situation and the cost of inputs such as electricity, which would make it increasingly more expensive to make vehicles, were particularly worrying, Nemeth said during a panel discussion at a Standard Bank People’s Wheels Award winners function this week.
Nemeth added that there were not many places around the world where automotive plants were shut down because of labour issues as often as they were in South Africa.
“My worry is that as time goes by it’s going to be harder for my counterparts and peers in South Africa to get their principals to agree to large investments in renewing their platforms in a market that is so unstable” in terms of input costs, labour issues and policy, he said.
Speaking exclusively to Business Report afterwards, Nemeth stressed the importance for automotive manufacturers to have strong local demand for the products it built. There was a need to think about ways to stimulate the local market.
Nemeth said Ford exported 75 percent of the vehicles its produced in South Africa and questioned why it would locate a bakkie plant in the country.
He said the ratio between exports and domestic sales should be closer and referred to Thailand, where industrial policy was used to make the country the bakkie centre of Asia.
“Maybe that’s something South Africa needs to think about.”
Nemeth said the only reason an automotive company would invest in manufacturing in South Africa rather than in Kenya or Nigeria or Egypt was because of the supply base, which was non-existent in other countries.
Norman Lamprecht, an executive manager at the National Association of Automobile Manufacturers of SA (Naamsa) said exports this year were projected to account for about 53 percent of the total cars produced locally.
He attributed the decline in this percentage, from 60.1 percent last year and 61.5 percent in 2010, to the impact of the recession in Europe. He stressed the importance of the efforts to establish a tripartite free trade area in Africa before some of these countries “start waking up and develop industrial policies that build the automotive industry”.
Lamprecht questioned why progress on this front had been so slow, stressing that a stronger push for free trade alliances with the rest of the continent was what was currently missing from South Africa’s industrial policy.
“If they [South Africa] could sort this out it would be of big benefit to a lot of industries that are already established in South Africa to have an opportunity to trade up into the continent and be able to compete with the Indians and the Chinese. That would really solidify South Africa’s position as a gateway into Africa,” he said.
Lamprecht also added that the vision and objective of discussions that had been taking place was to have a tripartite African free trade area involving 26 countries in the Southern African Development Community, Common Market for Eastern and Southern Africa and East African Community by 2017.