Business beckons state to the table

Attitudes to infrastructure and stability have to change before production and jobs can grow in the automotive sector, says industry leader

As much as R60bn could be invested in SA’S vehicle and component manufacturing industries over the next five years.

However, before BCM and Nelson Mandela Bay can be beneficiaries — even though over 50% of SA’S automotive production is located in the Eastern Cape — attitudes towards creating and maintaining world-class infrastructures will have to change.

This is the analysis of Thabo Shenxane, who heads the automotive industry development centre in the Eastern Cape.

“To secure even part of the investment, immediate and urgent action is required around the state of cities and their planning to support the manufacturing industry.

“While the province’s economy and jobs are driven by the manufacturing industry value chain, particularly global automotive original equipment manufacturers (OEMS) and suppliers, the level of investor confidence generated by local authorities is dangerously inadequate.”

To maintain or exceed this 50%, local municipalities and the provincial government need to work together with manufacturers to invest in utilities and logistics infrastructure.

“How can we possibly hope to encourage further investment in our region with the current poor and deteriorating infrastructure management and business engagement? Business needs certainty.”

The importance of the automotive sector could not be overstated, Shenxane said. It provides at least 457,000 jobs in the formal sector, 110,000 of which are in manufacturing, and is the largest manufacturing sector in SA, contributing around 6.5% of the GDP.

“It is therefore very concerning that manufacturing production is declining at a time when increased industrial activity is needed to revive the ailing economy.”

Manufacturing production decreased by 3.4% in January compared to January 2020.

“SA’S economy contracted by 7% in 2020. It is imperative that efforts are intensified to revive it. We need to focus on implementing recovery plans. Local and provincial government must both contribute. It starts with basic governance, infrastructure planning and engagement.”

He said SA’S share of global new motor vehicle production declined from 0.69% in 2019 to 0.57%. Production volumes dropped 29% to 447,218 units in 2020, a much steeper decline than the global average production decline of 16%.

“While SA is a small player globally, the whole sector is fully integrated into global auto supply chains, exporting to seven global regions. Given their exposure to global markets, SA manufacturers are under the same pressures as those based in other countries.

“Essentially, if the country’s economy is to grow and the sector is to reach targets for growth transformation and jobs, governance at every level must be supporting, not hindering the growth of these businesses. Infrastructure investment and management is at the centre.”

One of the biggest concerns, he said, was water. BCM is under pressure but not as sharply as Nelson Mandela Bay, where the dam levels are at just over 12%.

“Day zero looms over us all. OEMS and other businesses need clarity; they need assurances on water contingency plans. Jobs and socioeconomic growth are linked to production, and yet no clear plan for the provision of water has been communicated.”