New face of strikes inhibits Gauteng's automotive industry growth

The four-week National Union of Metalworkers of South Africa (Numsa) strike in July dealt a major blow to the Gauteng economy in general and the automotive industry in particular with business and political leaders calling for drastic intervention in the “new face of labour unrest”. Speaking at an automotive industry business panel discussion hosted by the Gordon Institute of Business Science (GIBS) last month, Gauteng MEC for Economic Development, Lebogang Maile, said that of the eight original equipment manufacturers (OEMs) for the automotive industry, half were located in Gauteng. “In addition 25% of all light motor vehicles are assembled and manufactured in the province – a large growth contributor that needs to be protected. “ Shibishi Matautoba, general counsel at Ford Motor Company and a member of the board of the National Association of Automobile Manufacturers of South Africa (Naamsa,) noted that logistics costs to the rest of the world were already high because of South Africa’s location at the southern-most tip of Africa and the province’s location in the northern interior – far away from top global export markets. “Add to this the increasingly expensive labour costs, coupled with unreliability in productivity and delivery, ongoing power cuts as well as an uncertain foreign direct investment environment and the country and the province could face the possibility of current investors pulling out and competing countries winning contracts,” he said. Matautoba said the face of strike action in South Africa had changed since 2012, with strikes running into weeks and months and severely impacting production and subsequent delivery. “If manufacturing plants are down for a week or two, there are generally contingency plans in place, but the longer strikes go on, the more backlog there is and the more car manufacturers miss the boat and let their customers down,” he commented. The 2013 Numsa strike saw Ford lose out on sales of 2 000 vehicles, which customers had to source elsewhere as production orders were way behind. BMW, Mercedes- Benz, Toyota, General Motors, Volkswagen, Nissan and some truck and bus makers were also affected by the 2013 strike, with Naamsa estimating that it cost producers R700m a day. According to Matautoba, the only thing the Gauteng automotive industry currently has going for it are the incentives for foreign investors. “Without incentives, there is no motor manufacturing and exporting industry,” he said. Economist at Renaissance Capital, Dr Thabi Leoka, said the biggest impact of the strike was investor confidence. “We need to look at our competitiveness in relation to other emerging markets. For example, Mexico’s labour is far cheaper, the labour force far more stable and productivity is high. Furthermore, it is located much closer to many of the traditional major car import markets such as the United States,” she said, adding that it would only be a matter of time before foreign companies did the maths and realised other emerging markets were better investment bets. “A struggling economy means higher inf lation rates and inf lation makes it very expensive for vehicle manufacturers to import the products needed to make automotive components. Then, the costs of wage increases are very high,” commented Leoaka. Vuyo Bikitsha, Numsa Eastern Cape secretary, noted that unions had compared high quality operators in South Africa with their counterparts in Germany, saying the European workers received wages of up to five times more than local workers. Leoka pointed out that the skills levels were vastly different which meant productivity was higher too. “It makes business sense to look at the total cost of production, including logistics costs, and then look at viability and competitiveness in the global market,” she added. Matautoba said regardless of market conditions, investors were willing to adapt but they needed certainty with regard to when they could expect a return on their investments as well as what type of return they could expect. “If the environment is stable, certainty is a given,” he said. INSERT & CAPTION 1 We need to look at our competitiveness in relation to other emerging markets. – Dr Thabi Leoka INSERT & CAPTION 2 Without incentives, there is no motor industry. – Shibishi Matautoba CAPTION A sea of red… Numsa workers on strike in Rosebank, Johannesburg earlier this year.