Posted: April 8, 2010
Keynote address by the Minister of Trade and Industry, Dr Rob Davies at the announcement of the Ford Motor Company South Africa-Puma Investment.
President and CEO, Ford Motor Company SA, Mr Jeff Nemeth
MEC, Mr Firoz Cachalia
Members of the Media
Ladies and gentlemen,
On 30 January 2008, I was honoured to be present at the occasion celebrating the announcement of Ford’s intention to invest in the production of its T6 pick-up trucks and diesel engines in South Africa. Since that announcement, the automotive industry in South Africa has not been immune to the global economic crisis. The crisis resulted in a global collapse in demand and lower production volumes which was so severe that it threatened the existence of some of the major international automotive producers. These challenges faced by the industry led to some sceptics to question the continued viability of the automotive industry South Africa.
I am therefore very pleased to be here today, not only to confirm the original investment but in fact, an expansion of the planned investment to R3 billion, roughly double the initial commitment. I wish to congratulate the Ford Motor Company for its decision to make these investments. It is an investment that is strategically important for both South Africa – in particular the cities of Tshwane and the Nelson Mandela Metropole – as well as the Ford Motor Company itself.
These investments demonstrate the confidence which global automotive producers have in South Africa as an investment destination and the supportive policy environment which we offer. These investments bring to R9 billion recent commitments to production that will straddle the transition from the Motor Industry Development Programme (MIDP) to the Automotive Production and Development Programme (APDP).
We know as the background to this investment, that Ford South Africa had to bid against a number of other possible global locations for these projects. Everyone who played a part in ensuring that these projects came to South Africa should be congratulated. In this regard, what I said two years ago still remains relevant. At that time I pointed out that it is very encouraging that we adopted a Team South Africa approach in this endeavour in which all three spheres of government, labour and the private sector worked tirelessly to make this investment a South African one. The outcome announced today is testimony to the important partnerships we have been able to build between business, government and labour, and the role that such partnerships can play in the economic development of our country.
We are glad that the Ford Motor Company understands, and is committed to building such partnerships that can play a critical role in the social and economic life of our country.
The automotive industry is the largest and leading manufacturing sector in the domestic economy. It has strong linkages with other industries, across the South African economic landscape. Through its backward linkages it draws in products from a range of other manufacturing sectors including steel, metal, plastic and leather products. Its’ forward linkages extend to financial services, motor retail and advertising. To illustrate; before the global economic crisis, the automotive industry’s direct contribution to gross domestic product had risen to 1, 5%, while its indirect benefits were close to 7%, including retail and other services. The sector also represented 10% of manufacturing investment, 16% of South Africa’s total exports and directly employed 135,000 people in manufacturing alone. It has a very high positive multiplier effect on the rest of the economy in terms of value-added manufacturing, employment, investment, balance of payments and net revenue generation.
The Ford Motor Company of South Africa has been a critical part of achieving these levels of growth. This investment ensures that Ford maintains a viable and strategic presence in South Africa and helps position South Africa as a globally competitive manufacturing location. We are therefore very pleased that the vision to grow the Silverton plant is being realised. Furthermore, the development at the plant in Port Elizabeth will be a first for South Africa: a new diesel powertrain technologies plant. Already, the engines produced in the Stuandale plant has become a symbol of reliability the world over and South Africans are proud that an engine of such high quality is the product of their labour. The projects and the undoubted potential for increased exports have significant potential for job creation and skills development. We are very much encouraged by the commitment to between 60 and 70% local content. This will increase Ford’s success in the development of new suppliers, particularly BEE firms as part of the supply chain.
The next generation pick-up truck will be on a global platform and will make the Ford Motor Company South Africa a volume based exporter. Currently, the operating environment is tough but we are confident that export orders will grow. Certainly, the automotive industry as a whole will derive benefit in this regard from the favourable market access arrangements that South Africa enjoys with the EU, SADC and USA amongst other destinations.
All stakeholders in the automotive sector will be well aware that since 2005 there has been an intensive and comprehensive review of the Motor Industry Development Programme (MIDP). This culminated, in 2008, in a new Automotive Production Development Programme (APDP) that will be implemented after the current MIDP expires in 2012.
The new APDP is structured in four key elements namely, tariffs, local assembly allowance, production incentives and automotive investment allowance. The programme will include a local assembly allowance (LAA) which will allow vehicle manufacturers with a plant volume of at least 50,000 units per annum to import a percentage of
their components duty-free. The LAA will be in the form of duty credits issued to vehicle assemblers based on 18% to 20% of the value of light motor vehicles produced domestically from 2013.
Manufacturers would also receive value-add support to help encourage increased levels of local value addition along the automotive value chain, with positive spin-offs for employment creation. The duty rebate credit will replace the current export based
Since the September 2008 announcement of the Automotive Production Development Program (APDP) framework that is set to replace the (MIDP) was made, long hours have been spent by Government and Industry stakeholders to finalise detailed implementation guidelines of the various elements of the program (APDP). The Automotive Investment Scheme (AIS), guidelines on the grant to both Original Equipment Manufacturers and component manufacturers have been completed. The scheme is meant to deepen the domestic automotive manufacturing industry. Work is also ongoing to explore opportunities in the medium and heavy commercial vehicle value chain. The recently launched IPAP2 (Industrial Policy Action Plan 2) demonstrates Government’s commitment to continue working with stakeholders in creating the necessary environment for further investments leading to significant
job retention and creation of new opportunities. Announcements regarding the implementation guidelines of the rest of the APDP can be expected in due course.
The progress made to date has clearly given the industry enough confidence to make significant investment commitments notwithstanding the tough and challenging economic environment brought about by the global economic crisis.
The recent investment commitments by VWSA, BMWSA and now FMCSA totalling about R9 billion between 2009 and 2013 will support at least 3,500 direct jobs in vehicle assembly. These investments will catalyse an estimated R4 billion of investment by component manufacturers sustaining a further 20,000 jobs during the same period. These investments will be supported through the Automotive Investment Scheme.
In concluding I would like to re-iterate that we are very pleased that Ford remains committed to investing in South Africa. It has been a mutually beneficial relationship and we are confident that this partnership will continue to grow for the benefit of all our people and our economic development.
We are proud to have Ford South Africa as one of our leading corporate citizens, and will continue as we have, to work with you and our labour partners as we again together and in partnership, continue to respond to the challenges. The evidence of working together over the past few years shows that together we are fully committed to the future growth and development of the South African vehicle and associated industries, including developing worker skills and improving supply base capabilities, which in turn supports our black economic empowerment objectives.
Finally I wish to mention the role of Mr Hal Feder, previous CEO of Ford South Africa and the current CEO, Mr Jeff Nemeth and the entire Ford team for making this investment decision possible. I wish all of you every success in growing Ford South Africa from strength to strength.