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GM gives SA car sector a R1bn push

Sep 30 2010 18:40 Svetlana Doneva

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Johannesburg - General Motors South Africa (GMSA) has announced a R1bn investment in three production lines, including the Chevrolet Spark which was previously built in Korea, at its Port Elizabeth plant.

This announcement brings the planned investment by automotive manufacturers in local production facilities over the next two years to nearly R9bn. Some 4 000 jobs will be created as a result of these investments.

BMW South Africa, Volkswagen South Africa and the Ford Motor Company South Africa all announced plans to expand their production facilities over the past 18 months.

This is a signal that the Automotive Investment Programme (AIS), introduced by the Department of Trade and Industry (dti) to attract investment in South Africa, has succeeded to an extent.

"We have allocated R2.7bn over the next two years for car makers to benefit from this programme and we have received almost ten applications," said trade and industry minister Rob Davies, who addressed media at General Motors' head office in Johannesburg on Thursday.

The goal of the AIS is to expand production, create jobs and increase the percentage of local components used in the manufacture of vehicles.

He added that that the dti is taking investment in the automotive sector seriously as it is the biggest single sub-sector in manufacturing and contributes 7.5% to the country's gross domestic product and 16% of exports.

The GMSA investment will also secure the production of the new generation Isuzu KB and Corsa Utility bakkies in South Africa as well as the entry-level passenger vehicle Chevrolet Spark.  Production of the Spark starts in the first quarter of 2012.

The new production line for the Spark will create 500 direct jobs as well as about 2 000 indirect jobs in downstream industries like component manufacturers.

Component manufacturers have been identified as critical in the dti's industrial plan for the auto industry. All automotive manufacturers have been incentivised to boost their quota of local content in order to encourage the sustainability of the industry.

GMSA will boost local content in its three lines to more than 40% from 29% previously.  

Total annual production at GMSA is also expected to almost double to 60 000 units per year. In order to qualify for dti incentives car makers have had to boost their annual production to more than 50 000 units per annum.

Edgar Lourencon, managing director of GM Africa, said that the decision to invest in a new line shows "high confidence that we can work together in the future".

He added that GMSA has confidence in government and that although the recent labour disruptions have raised concerns, the viability of the industry is certain.

Automotive employees  who are part of the National Union of Metalworkers SA, brought car production in the country to a grinding halt last month over wage disputes.  

When asked whether industrial action would compromise the competitiveness of local industry, Davies said that he was not concerned.

"Strikes are not unique to South Africa," he said.

"We do want to minimise the impact of the strikes though," Davies added.

- Fin24.com

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