Ford Motors is still committed to South Africa
The automotive giant is still finding 'once in 30 years of investment opportunities.'
South Africa’s president Cyril Ramaphosa has received major backing from automotive giant Ford Motors South Africa in his drive to raise R1.2 trillion in new investments from domestic and international investors over the next five years.
This week, Ford has supported South Africa’s government efforts to localise the production of vehicles that will be exported to global markets, helping the country to become automotive production force.
Ford, along with national, provincial and local government, launched the Tshwane Automotive Special Economic Zone (SEZ) in Pretoria on Tuesday. SEZs are areas targeted by the government for investment activities, with the support of the private sector, to increase SA’s trade balance, investments, and job creation.
The government has spent R3.6 billion in the first of the three phases to launch the Tshwane Automotive SEZ, which is expected to create 6,700 direct jobs once it is fully operational by 2021.
Although Ford has not contributed money to establish the automotive SEZ, it has partnered with the government to bring in nine of its automotive component suppliers to establish their manufacturing operations on the land where the SEZ is located.
Neale Hill (pictured), the MD of Ford SA, said the company is still committed to South Africa’s economy at a time when economic growth is declining and the country has faced downgrades to its credit rating agencies from Moody’s Investors Services, Fitch Ratings, and S&P Global Ratings.
M&A Africa: Why is Ford still committed to South Africa’s economy after more than 90 years of operating in the country?
Neale: Ford has taken a pragmatic view on South Africa. We still believe that South Africa is attractive from an investment point of view. Even though the economy is in a difficult space, we are still finding once in 30 years of investment opportunities. South Africa has free-trade agreements with Europe, which allows us to have duty-free exports of locally manufactured vehicles. The performance of the rand against other countries allows us to grow exports. When we kicked off our export-driven investments in 2009, Ford was producing approximately 25,000 vehicles per year, primarily for the domestic market. Since then, our production has grown by more than 400 percent and we are unlocking similar expansions in our supplier base.
M&A Africa: The private sector has lamented the slow pace of economic reforms in South Africa and the lack of policy certainty. Are you also discouraged by policy uncertainty?
Neale: We believe that policy certainty has improved in recent months. The recently finalised SA Automotive Masterplan is important for investments in South Africa. (The masterplan sets out several objectives, including increasing the localisation rate from 35 percent to 60 percent and doubling employment in the automotive industry (from current levels of about 240,000) by 2035.)
The masterplan gives us clarity about where we are going in terms of the investments that the automotive industry will deploy in the country. We believe in the country’s potential to become an economic powerhouse in the global automotive manufacturing environment. We are fully committed and support the automotive masterplan 2035 vision. We aim to contribute towards the goal of achieving 1 percent of global vehicle production in South Africa and we will be striving to achieve the 60 percent local content target by 2035.
M&A Africa: How much has Ford invested in South Africa’s economy in recent years?
Neale: Ford has spent more than R11-billion in our local operations since 2009, with most of the money going into the Silverton vehicle assembly plant in Tshwane, which builds single- and double-cab Ford Rangers, along with two variants, the Everest sports utility vehicle and the high-performance Raptor. This money also went into Ford's Struandale Engine Plant in Port Elizabeth. In 2016 alone, we invested over R3 billion to increase our production capacity and support the local production of the Ford Everest SUV.
Last year, we expanded our capacity to produce up to 168,000 vehicles annually, with around two-thirds of these being exported predominantly to Europe. As a result of this, Ford contributes 1 percent of South Africa’s GDP as one of the country’s largest and original vehicle equipment manufacturers.
M&A Africa: How will the Automotive Special Economic Zone benefit Ford?
Neale: We broke ground on the first-phase of Tshwane Automotive SEZ and are currently engaging with our 18 suppliers of which nine have expressed interest in establishing operations on the site.
Having our vehicle suppliers a stone’s throw away from our Silverton vehicle plant will contribute immensely to improving our efficiencies, reducing transport, logistics costs and reducing non-value added operations.