Daily Dispatch

Ricochet effect of politics at top

THE automotive industry in South Africa is a significant contributor to the country’s GDP and a crucial contributor to much-needed economic growth and job creation.

A key player is Mercedes-Benz SA (MBSA), one of the largest foreign investors in the country.

We are most fortunate it is based in East London where, for the past six decades, it has also been a major employer and significant contributor to the local and regional economy.

MBSA has pumped a lot of energy and money into its high-performing East London plant. We reported this week that since 2016, parent company Daimler had invested R660-million in it.

Last year alone some R416-million was spent on retooling the plant for the C350 plug-in hybrid car. Before that it spent some R2-billion in its preparation for the roll out of its next-generation C-Class vehicles.

This has all paid off. MBSA appears to have bucked regional, national and global economic trends to show excellent annual results.

It has also now announced plans to expand and build three new cars at its highperforming East London plant. This is great news for Buffalo City where unemployment grew by a further 5.3% in the last quarter of 2016 – meaning some 26 000 more people were in need of employment.

Outgoing MBSA CEO Arno van der Merwe warned that global competition is fierce and there is a strong need for cooperation and alignment.

At the same time, Van der Merwe played down the issue of a possible credit ratings downgrade saying business should simply run itself well to support political processes to create change.

But, the truth is that every business, no matter how big or efficient, also requires a supportive investment environment.

There can be little doubt that MBSA has enjoyed support and has used it well.

Its learning academy, launched in March last year with funds from Treasury's Jobs Fund, has reportedly resulted in 400 people being trained and getting formal jobs, and another 100 being in the pipeline for employment placement.

The academy is training 230 shop-floor workers and 50 artisans a year. This is good news all round.

But we should not underestimate the effect of another credit ratings downgrade. The well-being of this country depends on companies like MBSA thriving.

This requires an environment of political stability, real policy reform and international confidence in the country’s political and economic future.

We continue to hover one notch above junk status. In the wings of our political theatre too many dramas are playing out – the SA Social Security Agency (Sassa) grant debacle being just one.

How the political elite deal with issues such as this one will dictate this country’s ratings status, its economic growth potential, and the future earnings and growth capacity of companies, including MBSA, which are so vital to the viability of this province.