Motor cluster will drive change

[Image] New Mercedes-Benz cars await export on
the docks of the harbour, below the factory.
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The Eastern Cape province opened another chapter in its ongoing efforts to improve its regional competitiveness and increase job creation with the formal launch of a dedicated automotive cluster.

The cluster will be represented by industry, government and labour.

The cluster agreement was signed by Volkswagen Group South Africa, the National Association of Automobile Manufacturers of South Africa (Naamsa), Mercedes-Benz, General Motors South Africa, the Ford Motor Company of South Africa, the authority of the automotive parts industry (Naacam), the National Union of Metalworkers, Transnet, Eskom, the Department of Economic Development, Environmental Affairs and Tourism, the Buffalo City Municipality and the Nelson Mandela Bay Municipality.

The minister of Trade and Industry, Rob Davis, was on hand to get the initiative under way at the Nelson Mandela Bay Metro on 19 March, just days after the grand opening of the Port of Ngqura outside Port Elizabeth.

At the Ngqura launch President Jacob Zuma reiterated the government’s commitment to bringing the Eastern Cape into the economic fold.

The province has three ports, each of which plays a critical role in the import and export of vehicles and parts to partners locally and overseas. The Port of Ngqura is already Africa’s major transhipment hub, while the ports of Port Elizabeth and East London continue to focus on clean cargo and automotive exports.

Industry’s changing face

A robust automotive sector plays an essential role in maintaining the overall health of the province, allowing it to stay internationally competitive, said Andrew Murray, executive director of the Eastern Cape Socio-Economic Consultative Council.

“If the industry sneezes, the whole Eastern Cape gets a cold.”

The council acts as a link between the government and relevant players in the province and, until now, has been the cluster facilitator. In time, the industry itself will take over the reins.

The numbers speak for themselves. With 50% of the country’s vehicles manufactured in the province the Eastern Cape is understandably seen as the automotive heart of South Africa.

Four of the country’s seven original export manufacturers are based in the province. They are Volkswagen South Africa (VWSA) in Uitenhage, Ford South Africa and General Motors South Africa in Port Elizabeth and Mercedes-Benz in Buffalo City. The sector employs 40 000 workers in 1 500 companies.

Globally the automotive sector is in transition and this will bring both threats and opportunities, Murray said. “If we don’t reassess this sector we are going to be found wanting.”

This is where the cluster will play an important role, creating a platform for more coordinated efforts and a better aligned industry to face the global challenges, he believes. There will also be regional spin-offs.

“The cluster will address the issue of regional competitiveness which will also have positive spin-offs for the rest of the Eastern Cape economy.”

The overall objective of the cluster is to maximise job creation, market share and productivity levels, said Murray. Initial efforts will focus on improving logistics, building the skills base of the labour market and assisting with supplier development.

It is hoped that the Eastern Cape cluster will tap into the experiences of the Durban Automotive Cluster, a successful initiative which was started in eThekwini in 2002,.

In pure numbers South Africa’s automotive industry hardly makes a dent in global markets. With an output of less than 1% of it is considered to be uncompetitive in global terms.

Despite this, major opportunities still exist, Murray said – they include emerging African markets as well as markets in South Africa and, more importantly, the Eastern Cape’s strategic location as a transhipment hub, linking the Americas with South East Asia.    

Focus areas

The government and Eastern Cape industry partners started talks about forming a cluster almost a year ago.

The need to do so became apparent with the introduction of the Automotive Production Development Plan (APDP), which came into effect in 2008. This scheme replaced the Motor Industry Development Programme in order for the sector to fall in line with the trade and tariffs requirements of the World Trade Organisation.

The APDP has shifted the emphasis away from export incentives to production and local manufacturing incentives.

In terms of logistics, the cluster will look at improving efficiency in the movement of goods and services within South Africa and to global markets.

As for skills, an alarming trend perceived in the global automotive industry is the shift away from semi-skilled and unskilled labour to a workforce of highly skilled individuals with sophisticated technical proficiency, Murray said.

“These jobs are disappearing, which means the cluster will need to focus on re-skilling, ongoing training and up-scaling apprenticeship programmes.”

In pursuit of this aim the cluster will embark on a full-scale needs and skills audit and in time hopes to create a centre of excellence in research and development with the help of the province’s tertiary institutions. This should contribute to addressing the skills shortages in the industry.

Suppliers form the backbone of the motor industry. The province has about 80 component manufacturers, which have to help keep the wheels turning by supplying the automotive manufacturers with components that meet international standards.

They face their own unique challenges, including access to finance, rising production costs and the availability of raw materials. The cluster will seek to nurture and improve local suppliers by creating various enabling platforms, said Murray.

Cluster welcomed

The launch of a cluster does not come a moment too soon, industry leaders and cluster partners all agree.  

David Powels, straight-talking MD of VWSA and chairperson of Naamsa, said the industry has never faced greater challenges. Despite the fact that last year VWSA broke its production record by 137 000 units there was an urgent need for a dramatic improvement in productivity in the industry. In 2011 VWSA celebrated 60 years in the Eastern Cape and currently produces about 70% of local content. Powels believes the cluster has the potential to make the Eastern Cape more productive and efficient.

“The industry has to dramatically improve its competitiveness to be able to compete against low-cost products coming out of low-cost countries. We fully support this effort and will put a great amount of energy, power and support into this,” Powels said.

General Motors communications manager Denise van Huyssteen said the company will be an active partner in the initiative. General Motors has been in South Africa since 1926 and continues to invest heavily in the industry, having spent R130-million on skills transfer in the past five years to make the industry more competitive.

“We are committed to the Eastern Cape and support the establishment of an environment that is conducive to sustainable economic growth; one that serves as a platform to create jobs and social prosperity.”