Investing in South Africa


Auto parts suppliers in R1bn investment

2 October 2008

Volkswagen South Africa has attracted several national and international vehicle component manufacturers to set up operations in Uitenhage in the Eastern Cape, to enable the automaker to take advantage of opportunities presented by the government's new Automotive Production and Development Programme.

By mid-2009, six new component suppliers will have invested approximately R1-billion in their new facilities, which will create about 1 000 jobs once they enter operation.

Volkswagen SA MD David Powels said the company was determined to take up the challenge presented by the new APDP, and extend their manufacturing capability improve competitiveness. Focus would be placed on cost, quality, technology, labour stability and skills development, he said.

"We have instituted an unprecedented focus on dramatically increasing manufacturing depth and extent of the local component supplier industry," he said in a statement this week.

"The new APDP presents the opportunity to revolutionise the South African supplier component industry which has a long way to travel before it can claim global competitiveness."

Six component suppliers

Five suppliers are already establishing manufacturing facilities in the Nelson Mandela Bay Logistics Park, situated adjacent to VW SA's Uitenhage factory, while another supplier will set up operations at the entrance to the Uitenhage industrial area.

VW SA purchasing division head Karlheinz Hell said that it was the company's vision to combine local strengths with international expertise, knowledge, and technologies, to create a network of best practice.

"By establishing these partnerships, especially if the result is competitive pricing, we will grow a sustainable foundation to optimise our supplier base," he said. "I congratulate these six suppliers for their commitment."

The five suppliers to be situated at the logistics park include interior plastic components manufacturer Faurecia Interior systems, metal pressing parts manufacturer Bloxwich Industries, side mirrors and cables manufacturer Flextech, bumper systems manufacturer Rehau Polymer, and headliner and door panel manufacturer Grupo Antolin.

The other supplier building new facilities in the Uitenhage industrial area is original equipment manufacturer Bel-Essex Engineering.

The Coega Development Corporation (CDC), operator of the logistics park, said Volkswagen SA's latest initiative would send a positive message to the auto industry and strengthen the position of the region in the sector.

"The positive impact of these developments to the economy of the Eastern Cape will be huge," said CDC chief executive Pepi Silinga. "They will bring dramatic shifts in people’s lives in the metro and in the province far sooner than expected."

Cost competitiveness

Powels said that in terms of cost competitiveness, there was a gap of more than 30% when comparing the South African automotive manufacturing cost structures to those in emerging automotive powerhouses such as India, China and Russia.

This meant that the existing domestic supplier base would have to significantly improve processes and productivity levels to both survive and grow in the medium term, he said.

"There is only one way in which the automotive manufacturing industry in South Africa will be able to survive in the medium to long term - by securing much higher levels of local content," Powels said. "This includes the need to introduce new technologies and increase the use of local materials in the domestic component manufacturing industry."

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