Transnet and premium vehicle manufacturer Mercedes-Benz South Africa are involved in discussions about major upgrades and extensions to the harbour in East London.
Mercedes-Benz South Africa (MBSA) CEO and executive director of manufacturing Andreas Engling confirmed the company is not satisfied with the state of the harbour and there have been ongoing discussions with Transnet since 2019.
About 650 000 units of the previous generation Mercedes-Benz C-Class were produced in East London during the seven-year lifecycle of this model, with the bulk of these cars exported to various global markets.
Speaking ahead of an event to celebrate the launch of production of the next generation C-Class at MBSA’s East London plant last week, Engling said Mercedes-Benz is discussing a three-step approach with Transnet about improvements to the harbour.
“The first step is to increase capacity in the East London harbour by installing more technical equipment.
“The second step is deepening the harbour so that bigger vessels are able to enter the harbour in the future but that is maybe a three- to four-year project.
“The third step would create a complete harbour environment around East London, but I don’t know if that will really come through or not because it is a really huge and expensive exercise.
“But the first two steps are definitely discussions we are already having with Transnet port,” he said.
Mercedes-Benz’s need for improvements to be made to the harbour received an unexpected potential boost last week when President Cyril Ramaphosa, Minister of Public Enterprises Pravin Gordhan and Minister of Transport Fikile Mbalula announced a significant reform that will enable the modernisation and transformation of South Africa’s ports system – the establishment of the National Ports Authority as an independent, wholly-owned subsidiary of Transnet.
The move was confirmed in a Sens announcement published by Transnet on Friday (June 25).
Ramaphosa said this will have a direct impact on port users and South Africa’s export industries, which will benefit from increased efficiency, lower costs and new investment in port infrastructure.
It will also have an impact on the lives of ordinary South Africans, who will benefit from lower prices of goods and more jobs throughout the export value chain, said Ramaphosa.
“Transnet has put in place an ambitious plan to invest R100 billion over the next five years in upgrading its infrastructure across the ports system.
“Achieving this target will rely on leveraging private capital to shore up the contributions of the state and establish world-class infrastructure at our ports,” he said.
Ramaphosa stressed that South Africa’s ports are vital to South Africa’s trade with the rest of the world and play a crucial role both in South Africa’s own economy and that of the wider Southern African region.
There are therefore massive benefits to be realised from reliable, efficient and competitive ports, he said.
Exports and investments
The Automotive Industry Export Council (AIEC) said last month the total value of automotive exports totalled R175.7 billion last year.
Despite this being a 12.9% decline because of Covid-19 from the record R201.7 billion in 2019, it still accounted for 13.9% of total South African exports, the AIEC said.
The launch of production of the new C-Class in East London follows Mercedes-Benz Cars committing to invest R10 billion in South Africa at the Investment Summit in 2018.
Jörg Burzer, the member of the board of Mercedes-Benz Cars responsible for production and supply chain management, on Thursday announced that Mercedes-Benz Cars has invested a further R3 billion in South Africa, which boosts the vehicle manufacturer’s investment in South Africa for the new C-Class to R13 billion.
The investment was used to modernise the East London plant, which has been designed for higher capacities.
Burzer declined to comment on the current capacity of the plant or the volumes of C-Class units it expects to export because this is competitively sensitive information.
Minister of Trade and Industry and Competition Minister Ebrahim Patel told Moneyweb that in his discussions with Mercedes-Benz the company had indicated that they “could potentially do more if we can resolve some of the constraints to growth, of which the principal one is infrastructure”.
Patel said the investment by Mercedes-Benz Cars in East London is very significant because Mercedes-Benz projections are that the new generation C-Class model will add 2 500 jobs to the East London economy, 600 of them in the factory itself.
Patel added that he visited a supplier to Mercedes-Benz in the East London industrial development zone (IDZ) that does the injection moulding for the dashboards and the door panels for the C-Class and they have effectively increased their employment by 50% or another 200 employees.
Energy and environment
Mercedes-Benz is also addressing the potential impact of load shedding and uncertainty of electricity supply to its production operations while at the same time making headway with the group’s strategy to become more environmentally friendly.
Burzer said the East London plant will be CO2-neutral in 2022.
“This means that we are driving for more green energy supply like everywhere in the world. This is one of our major objectives and focus of our Ambition 2039 strategy,” he said.
With its Ambition 2039 strategy, Mercedes-Benz is striving for a fully networked and completely CO2-neutral vehicle fleet in less than 20 years and aims to have plug-in hybrids or all-electric vehicles accounting for more than 50% of its sales by 2030.
Burzer said Mercedes-Benz’s production facilities are far ahead of the targets in this strategy and its East London plant is part of this.
Engling said they have started some smaller projects using solar panels to generate electricity but the next and bigger project will involve covering the plant’s electricity base load requirements through the use of solar panels.
“That is a project that we have already started and hopefully we can finalise that in the next 12 months,” he said.