Isuzu Motors of Japan will be investing R1.2 billion in its next-generation bakkie programme in South Africa, with R2.8 billion in additional total local content value generated through the lifecycle of the programme.
Yoichi Masuda, senior executive officer for Isuzu Motors Limited and chair of the Isuzu Motors South Africa board, confirmed the investment on Monday, adding that current plans are to grow the company’s annual bakkie production to 29 000 units a year.
“Our decision to invest in the production of the next-generation bakkie in South Africa demonstrates our commitment to this market.
“This is further reinforced by the fact that this operation is the first bakkie and truck manufacturing and distribution operation outside of Japan which is 100% Isuzu owned.”
Predictability and stability
Masuda emphasised the important role the government’s Automotive Production and Development Programme (APDP) plays in providing predictability and stability for investors when making long-term business decisions.
“We fully support the requirements of the extended APDP and are working on various initiatives to ensure that we contribute to the achievement of the South African Automotive Master Plan aspirational targets over the coming years,” he said.
The investment announcement follows Toyota South Africa Motors’ (TSAM’s) revelation last week that it will be investing R2.43 billion in producing a new passenger car at its Prospecton plant in Durban, from the end of 2021.
TSAM has not yet disclosed which new model it will be producing at the plant. It decided in 2012 to stop local production of the Corolla from 2020.
Not ‘dramatic’ news
Azar Jammine, chief economist at Econometrix, said the investments by Isuzu and Toyota are not massive relative to what the motor industry invests in South Africa’s economy.
“It’s positive that they are carrying on and remain committed to South Africa and [this] shows a level of confidence in the country, but I wouldn’t see it as dramatic news in any way.
“These are kind of add-ons and amount to what one would have expected them to invest if they were to remain as ongoing businesses in South Africa.
“It suggests they are staying in South Africa notwithstanding all the problems in the country. But I wouldn’t get too excited about suggesting that we are about to enter a new phase of economic growth on the back of these investments.”
Minister of Trade and Industry Ebrahim Patel however welcomed Isuzu’s announcement and indicated that it will contribute immensely towards President Cyril Ramaphosa’s investment drive.
“This investment shows confidence in the South African economy’s growth potential and will help to secure more than 1 000 direct jobs at the plant.”
Jammine added that the timing of the investment announcements was dictated by the replacement lifecycle of the model, rather than economic circumstances and was also influenced by the holding of Ramaphosa’s investment conference.
He stressed that he did not want to sound negative but was puzzled by the investment figures released at last week’s investment conference.
Jammine said R290 billion was pledged last year and R371 billion this year, which amounted to a total of R661 billion in relation to total capital investment per year of R886 billion.
“That shows that R661 billion is huge, even if it’s spread out over five years. It is R132 billion a year, which is around 15% of annual fixed capital formation.
“It’s massive but why are we not seeing it in the capital formation and economic growth numbers? Capital formation has been falling,” said Jammine.
“In fact, if you want to be a cynic, you’d say that if it weren’t for these investment projects, capital investment would have plummeted and so all they are doing is filling in the gap.”
The next-generation bakkie will replace Isuzu’s current D-Max bakkie, previously named KB, which has been manufactured in South Africa since 2012.
The model was initially produced locally by General Motors South Africa (GMSA) until its disinvestment from South Africa in 2017.
This resulted in Isuzu acquiring GMSA’s manufacturing plant in Port Elizabeth and establishing a new company in South Africa to take over the company’s light commercial vehicle operations and the balance of shareholding in the trucks business it did not already own.
About 1 000 direct jobs, 4 000 jobs through its dealer network and many more through its base of 430 suppliers in South Africa were saved by this decision.
Michael Sacke, CEO and MD of Isuzu Motors South Africa, said SA will initially serve as the main market for the next-generation bakkies.
But Sacke said growing volumes are expected to be generated from the rollout of its sub-Saharan Africa growth strategy, which will be geared at further strengthening its position in key markets, as well as its overall distribution footprint.
Isuzu’s biggest markets in sub-Saharan Africa currently include Kenya, Zimbabwe, Zambia, Mozambique, Mauritius, Senegal, Ghana and Ivory Coast.
The company’s sales in these markets increased last year by 17%, compared with the prior year.