A total of R3.5 billion is to be invested by the government in developing the Tshwane Automotive Special Economic Zone (SEZ) next to the Ford Motor Company of Southern Africa’s production plant. The first phase of the project will create 6 700 direct jobs.
Neale Hill, the managing director of the Ford Motor Company of Southern Africa, said having its suppliers located adjacent to the Silverton assembly plant is a crucial step towards increasing the efficiency of its local operations and unleashing further potential increases in production capacity for the domestic and export markets.
Hill said its vision is to double production at its Silverton plant, as part of a journey to become the largest Ford Ranger manufacturing facility in the world.
He said the plant has an annual production capacity of 168 000 units but is currently producing just over 100 000 units a year; its plan is to double production to 200 000 units a year over the next three to four years.
He declined to comment on the investment that would have to be made in the plant to double its production volumes, or the number of jobs this investment would create, because the investment has not yet been approved.
Ford invested more than R11 billion in its local operations between 2009 and last year, resulting in its production capacity increasing from 25 000 to 110 000 vehicles a year.
The company’s most recent investment of about R3 billion enabled the Silverton plant to expand its production capacity further and it is now capable of producing 168 000 vehicles a year.
About two-thirds of the vehicles Ford produces are destined for export markets, predominantly in Europe and the UK.
Hill said nine Ford supplier companies have expressed keen interest in investing in the Tshwane Automotive SEZ, while 13 companies has signed letters of intent.
The Department of Trade and Industry is the key stakeholder and is responsible for all ten SEZs in South Africa. However, the Tshwane Automotive SEZ is an extension of the Gauteng Province’s greater OR Tambo SEZ and a collaboration on a provincial level with the Gauteng Province, the Gauteng Growth and Development Agency and the Automotive Industry Development Centre, which has been appointed the operating company for this SEZ.
On a local government level, the project has partnered with the City of Tshwane and the Tshwane Economic Development Agency.
The Tshwane Automotive SEZ will be launched in several phases, with construction already underway for the initial 81-hectare first phase. Once completed, the SEZ will span 162 hectares of land currently owned by Tshwane.
Hill said the R3.5-billion investment in the establishment of the first phase of the SEZ is for the construction and the establishment of the township, including the infrastructure, electricity, water, roads and factories that would be leased to supplier companies by the city.
This investment excludes the investments the supplier companies would make in equipment and machinery for their own factories.
Hill said the first supplier would be moving into the facility in July and would be operational by the end of next year.
President Cyril Ramaphosa said this automotive SEZ would not only catalyse further growth in a sector that is the mainstay of South Africa’s national industrial base, but also create jobs, help to support local businesses and spur growth in the city’s economy.
Ramaphosa said the SEZ would positively contribute to the government’s industrial strategy, by attracting automotive component manufacturing companies and related services.
He said there are a number of benefits to businesses being in a SEZ, such as a preferential corporate tax regime, building allowances, employee tax incentives, favourable customs regulations, VAT exemptions and support for capital investment and training.
Ebrahim Patel, the minister of trade and industry and competition, said the launch of the Tshwane Automotive SEZ comes at an important moment in Africa’s economic story, following the implementation phase of the African Continental Free Trade Area. The latter was launched in July this year, by Ramaphosa and other African heads of state.
Patel said the agreement would bring together countries that constitute a market of 1.3 billion people, with a combined GDP of some $2.5 trillion.
He said South Africa’s automotive industry is a significant exporter: over 350 000 of the more-than-600 000 vehicles assembled locally last year were exported. This resulted in R165 billion in export earnings, which comprised over 11.5% of South Africa’s export basket by value.
“Last year alone the African continent imported some R238 billion worth of cars from the rest of the world. That is an opportunity for South Africa and other countries on the continent [that] can become the suppliers of choice,” he said.