R1.2bn deal boosts auto sector
Chinese, IDC back Coega industrial park
THE auto sector in the Eastern Cape is to receive a R1.2-billion investment boost with the signing of an agreement between the Beijing Automobile International Corporation (BAIC) and the Industrial Development Corporation.
A memorandum of understanding (MOU) – signed by Eastern Cape MEC for economic development, environmental affairs and tourism Sakhumzi Somyo in Cape Town on Saturday – set in motion processes for the investment into small, medium and micro-enterprises (SMME’s) in the auto sector.
According to Somyo, locals will see a boost in jobs with the development of an industrial park at the Coega IDZ next year.
The industrial park will house automotive component suppliers within close proximity to the BAIC Auto SA assembly plant, while also catering for other OEM’s (original equipment manufacturers) in the region, as well for exports into international markets.
The industrial park, expected to start operations next year, guarantees an estimated 600 permanent jobs. Speaking at the signing, Somyo highlighted the automobile sector as one of the biggest employers in the province, saying he hoped this investment would guarantee the benefit of black-owned businesses in the auto manufacturing value chain.
He added that the signing of the MOU came at a time when government was going ahead with the implementation of its radical economic transformation agenda, which is aimed at changing patterns of economic ownership in the province.
“Through this initiative, we are starting to walk the talk towards the right direction,” he said.
“The establishment of the industrial park will also be convenient for the OEM’s as they will now have their component suppliers located close to their assembling plants. This will ensure improved efficiencies and reduction of inventory costs for both OEM’s and the suppliers, resulting in a win-win situation for all concerned,” he said.
“Six suppliers from China and South Africa have already concluded their respective feasibility studies and have expressed definitive interest to set up operations in the industrial park to manufacture car seats, bumpers, dashboards and interior trimmings, amongst other components.”
This investment comes just months after an R11-billion injection was announced by the BAIC last year for the construction of a car manufacturing plant in the Coega IDZ.
The plant, currently in the construction phase, has the potential to employ about 1 000 people during Phase 1, with another 10 000 jobs to be created throughout the automotive value chain.
The BAIC Automobile project has committed to having its vehicle models comprise 60% local content by the fourth year of production.
“This is an extraordinary commitment for a new entrant in the market. We are hopeful that other OEM’s which have been in operation for decades in our country would at least match this commitment as they are currently sitting at an average of 35% at the moment,” he said.
Somyo urged both parties to ensure that they delivered on the contents of the MOU to radically transform the auto sector in the Eastern Cape. “We must see the results of this MOU taking effect throughout the auto sector value chain for it to have real meaning in the lives of our people,” he said. —