The AIDCEC is calling for immediate and urgent action around the state of infrastructure and planning in the Eastern Cape to support its manufacturing industry with special focus in the metros.
While the province’s economy and jobs are driven by the manufacturing industry value chain, particularly global automotive OEMs and suppliers, the AIDCEC CEO Thabo Shenxane said the level of investor confidence generated by local authorities was “dangerously inadequate”.
“With dam levels servicing Nelson Mandela Bay at just over 12% and day ZERO a looming reality, OEMs and other businesses need clarity and assurances on suitable water contingency plans,” Shenxane said.
“Water is as much a human necessity as it is a requirement in the manufacturing processes that contribute massively in both GDP and jobs in the province – already struggling socio-economically.” Jobs and socio-economic growth are linked to production and yet no clear plan for the provision of water to industry at Day Zero has been communicated as yet.”
Shenxane said “dreadful and hopelessly inadequate efforts to create business confidence with a clear water contingency plan in the Nelson Mandela Metro not only disrupt existing business planning but certainly do very little for future investments into the Nelson Mandela Metro and the province at large.”
“How do we possibly hope to encourage further investments in our region with the currently demonstrated poor and deteriorating infrastructure management and business engagement? Business needs surety,” he said.
The Nelson Mandela Bay’s water crisis aside, Shenxane said the near collapse in Governance within the Buffalo City Municipality as published in the Daily Dispatch on 24 April 2021 “read like a horror story to both existing and potential investors and were indicators of the poor level of governance, planning and infrastructure support provided to the region’s industry.”
The Eastern Cape produces more than 50% of the country’s automotive production. Shenxane said local municipalities and provincial government need to work together, with “deeper regard” to invest in utilities and logistics infrastructure that is supportive to a business environment to grow the economy, which had already been battered by global supply disruptions caused by COVID-19.
South Africa’s share of global new motor vehicle production in 2020 declined to 0.57% from 0.69% in 2019. Production volumes dropped 29% to 447 218 units in 2020, yet the average global production decline was more moderate at 16%.
Shenxane said while South Africa is a small player globally, the whole sector is fully integrated into global auto supply chains, exporting to seven global regions. Given their exposure to global markets, South African manufacturers, including those based in the Eastern Cape are under the same pressures as those based in other countries.
“Essentially if the country’s economy is to grow and the sector is to reach targets for growth transformation and jobs, government at every level must be supporting, not hindering the growth of these businesses. Infrastructure investment and management is at the centre,” Shenxane said.
The exposure to global pressures is also at the component manufacturing level, with OEMs sourcing components from plants in every major automotive manufacturing region. Amidst a diverse group of various tier-level automotive component suppliers in South Africa there are around 180 first-tier suppliers, of which about 75% are foreign multinational companies. These and others exported R53,7 billion worth of components, across the globe in 2019.
Shenxane said the importance of the automotive sector could not be overstated. It provides at least 457 000 jobs in the formal sector, 110 000 of which are in manufacturing and is the largest manufacturing sector in the country, contributing around 6.5% of GDP.
“It is therefore very concerning that manufacturing production is declining at a time when increased industrial activity is needed to revive the ailing economy. Manufacturing production decreased by 3.4% year-on-year in January 2021.
“With South Africa’s economy having contracted by 7% in 2020, it is imperative that efforts are intensified to revive the ailing economy and focus on the implementation of recovery plans, but local and provincial government needs to contribute – and its starts with basic governance, infrastructure planning and engagement,” Shenxane said.
The Premier’s admission in a Times Live article of the 23 April 2021 titled “ANC failed in local government” and the Daily Dispatch article of the 24 April 2021 titled “BCM on the verge of collapse, ANC Councillors agree” do not paint a positive picture for our region as a destination for investments.
“It must not be forgotten that as much as R60 billion could be invested in the South African vehicle and component manufacturing industries over the next five years. If the Eastern Cape hopes to be a beneficiary of that investment and others, then government – starting with the local Buffalo City and Nelson Mandela Bay Municipalities – will need to significantly step up,” Shenxane said.