New face of strikes inhibits Gauteng's automotive industry growth

22 Sep 2014 - by Adele Mackenzie

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.