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Sep 20, 2012

Gigaba promises to use leverage at State firms to bolster auto sector competitiveness

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Public Enterprises Minister Malusi Gigaba on government's openness to alternative infrastructure funding proposals. Camera Work: Duane Daws. Editing: Darlene Creamer. Recorded: 20.9.2012.
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Public Enterprises Minister Malusi Gigaba has committed State-owned Companies (SoCs) Transnet and Eskom to playing their part in raising the long-term competitiveness of South Africa’s automotive industry and has also promised to facilitate near-term deals that will alleviate constraints to further growth and investment, including the divisive issue of port charges.

Gigaba made the pledge following a meeting in Johannesburg with representatives of the National Automobile Association of South Africa (Naamsa), whose members include seven multinationals that produce vehicles in South Africa, including BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen.

These companies have collectively made investment commitments valued at over R15-billion, following confirmation by the South African government that it would extend incentives to the industry until at least 2020. This support would be extended through the Automotive Production and Development Programme, which will replace the long-standing Motor Industry Development Programme from January 2013.

The support to the sector was also central to South Africa’s industrial policy action plan, which had been established to support greater economic diversification and to reinvigorate the manufacturing sector in particular.

Gigaba said he stood ready to play a “robust facilitation” role to support the ambition to expand local vehicle production from 600 000 to 1.2-million units by 2020. To do this he would seek to walk the difficult line between ensuring that the SoCs remain commercially sustainable, while also demanding that their projects, operations and cost were aligned to the country’s broader socioeconomic objectives.

An Automotive Industry Competitiveness Forum, comprising top-level officials from the Department of Public Enterprises, Eskom and Transnet, as well as representative from the automotive companies and technical executives from Naamsa, had been created to collaborate jointly on short-, medium- and long-term initiatives to bolster the overall competitiveness of the sector.

Technical teams were already working on a range of issues, including port charges, which the domestic automotive manufacturers had identified as representing an obstacle to their competitiveness.

The global original-equipment manufacturers ran competitive internal processes to determine where, across their global production sites, new vehicle models would be manufactured. Through these processes, it emerged that port fees, together with other logistical issues, were areas were South Africa lacked relative competitiveness.

Naamsa president David Powels, who is also MD of Volkswagen South Africa, said Transnet was currently undertaking a benchmarking exercise to determine whether its port charges were out of kilter with competitor jurisdictions and that he was confident of a positive resolution to the matter.

In the interim, President Jacob Zuma had announced a R1-billion port tariff rebate for exporters of manufactured goods for the 2012/13 financial year.

Powels reported progress on other logistical and operations problems that had been raised in working groups with Transnet in recent years and Gigaba promised to use the new forum to accelerate resolution processes, saying the immediate focus was on “quick wins” while work proceeded on the longer-term strategy.

The forum would meet again on December 3 to review progress.

The Minister also reaffirmed government’s strategy of seeking to move rail-friendly cargo, such as automobiles, from road to rail, and said government was open to alternative funding models to ensure that growth and competitiveness-enhancing rail investments were made.

A significant portion of Transnet’s R300-billion, seven-year investment programme would be directed towards the so-called general freight business, of which the automotive sector was a key customer.

In fact, the group had set an aspiration of raising the number of automobiles moved by rail by 338% by 2018/19, from 148 000 last year to 648 000 units.

Edited by: Creamer Media Reporter
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