Industry begins to unpack downstream impact of GM exit

The full impact of General
Motors’ (GM) decision to exit
South Africa – including the
impact on manufacturing and
shipping volumes – will likely
only become clear in a few
weeks’ time as events continue
to unfold, a well-placed
automotive manufacturing
source told FTW off the
record. But, he added, it was a
positive sign that Japanese car
maker Isuzu was taking over
the Struandale plant in Port
Elizabeth, Eastern Cape.
Senior industry economist
at FNB, Jason Muscat echoed
these views, pointing out that
Isuzu could even increase
production at the plant after
announcing its decision to
target more exports into Africa.
While Haruyasa Tanishige,
senior executive for the sales
division of Isuzu Motors, did
not elaborate on expected
production volumes, he
said that the company was
“committed to the South
African market”, confirming
that Isuzu was building a
strong base locally to further
its growth plans on the African
continent in the long term.
“Evidence of this is our
recent purchase of GM’s 57.7
percentage shareholding in its
East African operations, which
has given us management
control of the company.
Integrating the South African
light commercial vehicle
operations into our business
is the next step in laying the
foundation for our growth
plans in the future,” he said.
Despite this positive spin,
fears remain
that GM’s
decision to
exit SA – after
having a
presence in the
country for over
90 years – was,
at least in part,
influenced by
recent political
events in the
country which
have added to
a depressed
local economy and that other
multinationals may soon follow
suit.
Ritch Schaafsma, vice
president for GM International,
said in a written response to
FTW that GM’s decision was
“based entirely on GM global
business priorities” and was
unrelated to government
policies.
Commenting on why
the company would not be
exporting some of the brands
as complete built up (CBU)
units into South Africa, he
reiterated the carefully worded
GM press release issued
last week that “continued
or increased investment in
domestic
manufacturing
would not
provide GM
the strong
returns
of other
investment
opportunities”.
“In this
context, we
believe the best
outcome is
for our valued
partner, Isuzu,
to integrate the manufacturing
operations into its African
business,” Schaafsma pointed
out.Minister of Trade and
Industry, Dr Rob Davies,
pointed to the “emerging
geopolitical dynamics” such
as the recent confirmation of
additional investment in the
United States, coupled with the
move of some parts production
from Mexico as another aspect
that could have influenced
GM’s decision. He said his
department was finalising an
automotive manufacturing
master plan for South Africa
with a view to growing
domestic production.
Spokesperson for the US
Embassy in South Africa, Heidi
Ramsay, told FTW that GM’s
decision was not an indication
of a general trend. “On the
contrary, a wide array of US
businesses, including Pfizer and
General Electric, have recently
made announcements about
new investments in South
Africa,” she said.
The Democratic Alliance
Shadow Minister of Trade and
Industry, Geordin Hill-Lewis,
said in a statement that GM’s
withdrawal was just one of a
growing list of foreign investors
losing confidence in South
Africa.
Furthermore, while not
commenting directly on
GM’s withdrawal, Steel and
Engineering Industries
Federation of Southern Africa
(Seifsa) senior economist,
Tafadzwa Chibanguza, pointed
to general contraction in steel
and engineering industry
manufacturing in April, noting
that the extent and timing
of these declines “cannot be
explained by anything other
than the unfortunate political
events that took place at the
end of March 2017”.
“The firing of former finance
minister, Pravin Gordhan, the
subsequent downgrades to
the country’s credit borrowing
capacity and the incessant
political noise inherent in the
system all have the capacity
to send the economy down
an unfortunate low-growth
trajectory,” said Chibanguza.
INSERT AND CAPTION
GM's decision was
based entirely on
global business
priorities.
– Ritch Schaafsma