Logistics and energy woes are poisoning SA’s motor industry, Ford warns

SA’s persistent logistics and energy crises are a “slow poison” that have grave repercussions for the local automotive manufacturing industry, says Ford Africa president Neale Hill.

Hill’s comments echo those of Thomas Schaefer, the CEO of Volkswagen Passenger Cars, who said SA was becoming an undesirable location for manufacturing cars due to issues such as load-shedding, rising labour costs and problems with Transnet.

Schaefer said last week that production at its Eastern Cape plant in Kariega is safe for the next few years, but warned that future production contracts were under threat.

Hill said the repercussions of SA’s crises are far reaching.

“My concern is that the automotive investment decisions being made now are not going to go our way, and we’ll feel the effects in five years’ time,” he told media at the SA launch of the Ford Puma compact crossover model in Cape Town this week.

He said bottlenecks at SA’s ports were forcing the company to use premium air freight for components to keep the production line going at its Silverton factory near Pretoria, where the Ford Ranger and Volkswagen Amarok bakkies are assembled for the domestic and export markets.

Local motor manufacturers require imported components to assemble vehicles. Delays in exporting their products could cost them international markets as clients turn to more efficient and reliable suppliers.

Ford is one of seven original equipment manufacturers (OEMs) building cars in SA — the others are BMW, Mercedes-Benz, Nissan, Isuzu, Toyota and Volkswagen — and has spent more than R21bn to expand and upgrade the Silverton plant to assemble its latest Ranger model. That amount includes R5.2bn to expand the facility for the country’s first plug-in hybrid-electric Ranger. The latter investment was announced at the commemoration of Ford’s 100th anniversary in SA earlier this month.

“Ships are waiting 20 days at our ports,” said Hill, referring to a severe backlog at the Durban harbour where about 70,000 containers are stranded on ships due to equipment breakdowns. There are also logjams at the ports of Richards Bay, Port Elizabeth and Ngqura.

It will take four-and-a-half months to clear the backlog at the Durban harbour, where about 63 vessels were still anchored and waiting to be processed last week, according to Transnet Port Terminals, which manages the Durban container terminals. The problems have been blamed on years of underinvestment in equipment and maintenance, mirroring the situation at Eskom which has led to SA’s power crisis.

“Unfortunately Transnet is getting worse, and we are a high-risk, volatile country,” Hill said.

While Hill doesn’t foresee the imminent demise of his company’s local manufacturing operations, he warned that SA might be seen as too much of a risk for future automotive investments.

Besides load-shedding, the implosion of SA’s freight and rail network has cost the economy almost 5% of GDP losses and affected the livelihood of many industries adversely, according to industry body Naamsa.

Hill said the repercussions were far-reaching not only in terms of the employment provided by local motor manufacturers and their suppliers, but also for consumers.

“You lose the local vehicle manufacturing industry and imported cars will be around 25% more expensive because of the loss of export credits,” he said, referring to the duty credits with which OEMs can cost-effectively import other low-volume models not manufactured in the country.

The SA vehicle manufacturing industry accounts for about 5% of GDP and directly employs more than 33,000 people. Hundreds of thousands more are employed in the components supply chain.

SA vehicle production amounted to 555,889 units in 2022, with vehicles and components exported to 152 markets.

droppad@arena.africa