Ford invests R1.5bn in South Africa

Janine Erasmus

Leading car manufacturer Ford has announced an investment of R1.5 billion (just over $200 million) into the South African motor industry. Making the announcement on 30 January 2008, president and chief executive of the Ford Motor Company of Southern Africa (FMCSA), Hal Feder, revealed a planned expansion of factories in Silverton, Pretoria, and Struandale, Port Elizabeth – the hub of the motor manufacturing industry in South Africa.

This will enable the plants to produce Ford’s next-generation range of small pickup trucks (known colloquially as bakkies in South Africa) and turbo-charged Puma diesel engines at its vehicle assembly plant in Pretoria and engine manufacturing facility in Port Elizabeth. The investment is expected to significantly raise South Africa’s standing as a worldwide export base for the Ford Motor Company.

“Winning this investment is a major achievement for everyone at Ford, as well as our partners in government, Numsa [the National Union of Metal Workers of South Africa], and our local suppliers, and highlights our strategic position within the future global footprint of Ford Motor Company,” said Feder. “It also underscores Ford’s ongoing commitment to expanding our operations in South Africa.”

Plans call for the commencement of diesel engine production in 2010, followed by production of the new pickup truck in 2011. Total annual manufacturing capacity at the Silverton plant will increase to 110 000 units, with 75 percent of vehicles manufactured destined for overseas markets, notably in Europe and elsewhere in Africa. At the Struandale engine plant, capacity will increase to around 180 000 units – again, most of these will be exported.

Rollout of the investment is expected in 2009 and will create 500 new jobs between the two factories by the time production hits top gear in 2011. Ford currently employs 4 500 people.

Government support for the local automotive industry

Gauteng Member of the Executive Council (MEC) for Finance and Economic Affairs Paul Mashatile lauded Ford’s commitment to the local automotive sector. Mashatile explained that the Gauteng provincial government is focusing its attention on the automotive industry as a platform for greater economic growth and job creation. He said that provincial government has engaged in several targeted interventions that are aimed at stimulating growth within the automotive industry and increasing its contribution to the provincial economy.

One of these is the Automotive Supply Park, an initiative of the Gauteng government’s Blue IQ, which has been tasked with developing economic infrastructure for large-scale projects. Located in the industrial suburb of Rosslyn, Pretoria, the Park aims to contribute to the sustainable growth of the automotive industry in Gauteng and South Africa by improving competitiveness locally and internationally.

This it intends to achieve by bringing component manufacturers into one location, strengthening and simplifying the supply chain because motor manufacturers, many of whom are located in Rosslyn, will have their main parts suppliers located in the near vicinity of their assembly lines and operations – thus ensuring a steady supply and no production delays.

According to Mashatile, there has been an increase in demand for accommodation at the Automotive Supply Park. He said that the Gauteng government plans to expand the facility in 2008, and together with the City of Tshwane will develop a similar facility in Silverton. “This we are doing to give further support to the growth of the automotive manufacturing base in Gauteng,” he said.

Another such initiative is the Blue IQ-driven Automotive Industry Development Centre. This was established to give the local automotive sector a boost globally by providing effective support systems to allow firms to step up their productivity and competitiveness. It offers facilities and services for design testing and research and development, as well as skills development and training through industry-specific courses.

In August 2007 the Automotive Industry Development Centre received an International Quality Crown Award for leadership in promoting quality standards in the South African automotive industry.

Mashatile remarked that these, and other interventions in support of the automotive industry, fell in line with the government’s overall commitment to developing Gauteng as a globally competitive city region – “a preferred destination for local and foreign investment and a world-class manufacturing hub”.

Increased local content in manufacturing

Ford also plans to support the local automotive industry by increasing its use of local resources. Currently the content of local components used in manufacturing sits at approximately 35 percent, but with the increase in production output this is expected to rise to 60 percent. Local suppliers will benefit as the annual expenditure on local components will increase six-fold from about R441 million each year to about R2.9 billion, says Feder, and black economic empowered (BEE) businesses will receive preference.

Said Mashatile, “To us the investment by Ford represents yet another vote of confidence in the provincial economy. We are particularly encouraged that this investment will have significant socio-economic benefits for the people of Gauteng. An economic impact study conducted by KPMG indicated that this investment could add R 79 billion to the provincial economy and create 690 000 new employment opportunities by 2025.

”We are delighted that Ford Motor Company of Southern Africa has indicated its willingness to partner with us as we together develop the automotive sector in Gauteng.”

Said Feder: “This is a long-term, strategic investment, and we view South Africa as a gateway into Africa. We are here to stay.”

Ford Motor Company of Southern Africa

Ford Motor Company of Southern Africa is a wholly-owned subsidiary of Ford Motor Company. It first set up operations in South Africa in Port Elizabeth in 1923, although Ford vehicles had been on sale locally since 1911 through an agent. Ford South Africa made Port Elizabeth its base and developed its assembly facilities, attaining 28% market share by the late sixties. Ford South Africa ran on its own until 1985 when it merged with the automotive operations of Anglo American to form Samcor, the South African Motor Corporation.

Although Ford disinvested in 1988 because of international pressure, the company returned in November 1994 and in February 2000, Ford announced that it would increase its local investment by taking a majority shareholding in Samcor. In 1998 Ford bought the remaining Samcor shareholding and renamed the company Ford Motor Company of Southern Africa.

Ford’s Pretoria assembly plant is the largest, most modern vehicle assembly plant in the southern hemisphere, according to the company.