China injects blns in South Africa car industry
August 19, 2016, 4:11 am

Photo taken on Sept. 27, 2011 shows a worker checking trucks in a FAW plant in Johannesburg, South Africa [Xinhua]

The new facility based in the Eastern Cape province’s Coega Industrial Development Zone (IDZ) – a multi-billion dollar industrial development complex – will produce between 40,000 and 50,000 cars a year, with capacity due to double in a later second phase.

This cars will be sold in South Africa as well as in the rest of the continent, as the country positions itself as a gateway for vehicle exports into the rest of Africa.

In 2014, Chinese vehicle maker First Automotive Works (FAW), launched a R600 million ($44.9 million) truck assembly plant in the Coega IDZ, which will ultimately produce about 5,000 trucks and 30,000 passenger and light commercial vehicles a year.

At the time, President Jacob Zuma said that the Chinese investment showed the benefits of South Africa’s membership in the BRICS.

“This investment also augurs well for South Africa’s position within the global automotive manufacturing network and proves once again that we have an attractive operating environment to host global multinational companies. In addition, as a member country of BRICS, we are encouraged by this investment as it demonstrates the practical benefits of this strategic forum,” Zuma said.

Earlier this year, Zuma launched a new vehicle assembly line at the Toyota factory in Durban.

“We welcome the investment of about R6.1 billion [$456 million] made in the past few years which has resulted in the launch today of the Toyota Hilux and Fortuner production lines,” Zuma said at the time.

He added that the investment clearly demonstrates the confidence that global automotive producers continue to have in South Africa as an investment destination, and the supportive policy environment offered in the country.

The BAIC investment is an outcome of the Forum on China-Africa Cooperation (FOCAC) that was held in Johannesburg in December 2015, where Zuma and Chinese Prime Minister Xi Jinping signed no less than 26 bilateral agreements valued at approximately R100 billion ($7.48 billion).

Automotive hub

Minister of Trade and Industry Rob Davies says the investment is significant and deepens South Africa’s economic ties with China.

“The size of this investment demonstrates confidence by China and confidence in South Africa as an investment destination. The investment is strategic and is a major project in terms of our bilateral relationship and a key project supported by the Inter Ministerial Committee on Investment,” he said.

Davies said the project positions the Eastern Cape as an automotive hub and has the potential of deepening the component supply chain, job creation and economic development.

South African new vehicle sales peaked at 649, 296 units in 2013. This was made up of 450,296 cars, 167,996 light commercial vehicles, 11,584 medium commercial vehicles and 19,340 heavy commercial vehicles. The largest sectors are intensely competitive with over 52 brands and 2 595 model derivatives in the new car and light commercial vehicle sectors.

Volkswagen South Africa General Manager Group Communications Matt Genrich told The BRICS Post he welcomed the investment.

“The South African motor manufacturing industry requires more volumes to attract more suppliers to invest in South Africa from which we could also benefit,” he said.

Despite the downturn in the domestic market, exports continue to power ahead with industry body, the National Association of Automobile Manufacturers of South Africa, saying exporters anticipate an improvement in vehicle export sales during the second half of 2016.

Helmo Preuss for The BRICS Post in Pretoria