Incentives, such as the Automotive Production and Development Programme (APDP), in the automotive industry would attract investment, but would not sustain it, and globally competitive operating costs and quality improvements would be required to sustain the investments made by major auto-makers.

“We [auto manufacturers] must jointly and aggressively work on these issues that challenge South Africa’s global competitiveness. If not, we will end up with a policy that simply masks the underlying inefficiencies,” said Ford Motor Company Asia Pacific and Africa executive vice president John Parker.

Speaking at the Car conference at the Johannesburg International Motor Show, he congratulated the government on completing the APDP (which will replace the current Motor Industry Development Programme in 2012), saying it aligned the common goals of large-scale production, local content and sourcing, skills development, and black economic-empowerment.

But Parker emphasised that the country could not rest on its laurels, and must maintain focus on the areas that were necessary to continue improving the industry’s global competitiveness. These were notably infrastructure, utilities, logistics and trade, and productivity and quality.

“Productivity and efficiency of the workforce compared with the wage rates needs to improve - our workforce is amongst the world’s most unproductive,” emphasised Parker.

“Efficiencies also need to be improved,” he added, stating that  a good example was South Africa’s ports, which were currently among the worlds costliest, and least efficient.

“Industry quality measures and scorecards need to improve, and this goes right up and down the supply chain if South Africa is serious about improving its export potential,” he noted.

These inefficiencies meant that the overall cost of doing business in South Africa was more expensive when compared with China and India and other Asia Pacific countries.

“Inferior infrastructure creates inefficient logistics systems. High priced utilities that still don’t guarantee supply, and frequent labour disruptions cost automakers precious down time. All contributing to an environment of higher operating costs and greater uncertainty,” Parker maintained.

Giving credit where he felt it was due, Parker said that South Africa had negotiated some preferential trade agreements that assisted the auto sector. “But we would like to see the country continue to pursue yet more export opportunities through trade deals.”

“With a long-term policy in place, I can see the South African auto industry ten years from now, and it can be a globally competitive industry, as we continue to grow the domestic capabilities of the auto industry, and continue to negotiate free trade agreements to establish more export markets, whilst ensuring that we measure ourselves and aggressively pursue overall efficiency targets that enable us to be globally efficient as low-cost producers,” Parker stated.

“Against this backdrop I can also see automakers, like Ford, thriving in South Africa, with integrated operations as a global manufacturing hub and an expanding export base.”

His optimistic address came a day after the National Association of Automobile Manufacturers of South Africa (Naamsa) released October vehicles sales figures, which showed significant declines in sales, and forecast that new vehicle exports from South Africa in 2009, could drop between 10% and 15%.

Passenger vehicle sales figures were down 34,8% year-on-year, light commercial vehicle sales decreased 23,7% in October, when compared with the same month in 2007, medium commercial vehicle sales dropped 45,3%. Heavy commercial vehicles, which until October had been encouraging, also showed a decrease of 18,2%.

The Naamsa numbers divulged “very disturbing information”, said McCarthy Motor Holdings chairperson Brand Pretorius, who added that many businesses in the motor industry would be experiencing viability pressures going forward, and companies would have to adapt to new fundamentals, in order to sustain the industry.

To subscribe to Engineering News's print magazine email subscriptions@creamermedia.co.za or buy now.