By now regular CARtoday readers will have read (and seen video of) about Ford’s billion Rand investment to expand South African operations in preparation for the production of its new Puma turbodiesel engine and next-generation compact pick-up, but there’s more to the picture than just a sizeable export program. The investment also includes a new manufacturing contract, one that boasts big numbers for Ford Motor Company South Africa and includes increased annual production capacity at the Silverton Plant in Tshwane (110 000 units per annum) and Struandale Engine Plant (180 000) in the Nelson Mandela Metropole means that FMCSA becomes a major player in the export business. The majority of these new engines and bakkies are units that will primarily be exported to Europe and other parts of Africa.
Not only is this a shot of testosterone in the arm of the South African Economy, but also the investment is of such scale that all those aligned with FMCSA stand to gain, eventually this all trickles down to you: the consumer/general public. Let me explain. FMCSA is currently achieving roughly 35 percent local content, which, through this investment, is eventually estimated to improve to 60 percent or so. FMCSA will also work with 110 local suppliers as annual spending on local components increases from just over R400 million to approximately R2.9 billion. FMCSA’s is also planning to increase its local workforce by 500 employees by the time production commences, equipping these individuals with the skills needed to competently keep up with the process. In short, this is the kind of investment not to be taken lightly.
Various other benefits come from this investment, but there is a question that remains partially unanswered. One cannot help but question why Ford would, at a time like this, invest so much into South Africa. First of all, the national electricity crisis stemming back over twelve months would have given Ford ample time to assess the viability of South Africa for such an investment programme. When a fellow journalist put forward this question at the media announcement of the R1,5 billion investment, the panel (made up of CEO and President of FMCSA Hal Feder, the US Embassy’s Donald Tietelbaum, City of Tshwane Councillor Galela Makama, MEC Paul Mashatile of Gauteng Provinsial Government, Dr Rob Davies of the Department of Trade and Industry and Ben Khoza of NUMSA ) answered that after (what appears to be) long research and the fact that Ford has had operations in South Africa since 1923 – a stint lasting an impressive 85 years – it was somehow inevitable that FMCSA land a deal like this.
I hate sounding like Dr Doom and yes, it’s great that Ford is willing to plough so much into the South African brand as it were. Feder stated in no uncertain terms that Ford is in this for the long term, that they go into this deal open-eyed and that it’s more of a belief in the quality of the South African people and the product we produce. That is all good Mr CEO and President but the South African Government has known long and well about the crisis that would soon cast a shadow of darkness over the land. While the national energy needs constantly increased, the Government sat and played the investment sponge. Even when demand was close to the limit, the Government found it more pressing to deal with other so-called matters of national interest.
This is truly a disaster, of real national interest, and what worsens it is that at a time like this when the 2010 Soccer World Cup gets ever closer (local business should boom closer to the time) the South African brand should be the most overwhelming product globally. I suppose it makes sense for Ford to start implementing this investing to start around 2009 – what could be better than to operate in a booming economy. The downside is that Eskom doesn’t see the end of our rolling blackouts (conveniently called “load-shedding”) until a few years after 2010 and this might be the last opportunity of this kind of colossal proportion that comes our way – in other words to attract more investments of this nature (and possibly even larger in value) we have a lot of stepping up to do in terms of meeting the kind of production numbers mentioned in the investment deal. In terms of our national power supply things aren’t looking rosy (even FIFA has expressed concern over its 2010 World Cup). This isn’t just about placing a few generators in a building and still hoping for at least minimal amounts of productivity (no doubt about it, the large manufacturers can afford huge power generators) because there are so many other factors to be considered when the power goes out (ever been in rush hour traffic when Eskom flips the switch?) and just a whole lot of domino effects that go with it all. Will the local suppliers have the funds for large generators, and what happens to them in situations of chaotic traffic conditions? . Yes Mr Feder, (globally) we should all practice responsible consumption of electricity, but just how far can the general public conserve?
Isn’t it great that manufacturers are putting so much trust in the hands of South Africans? The signing contracts like this can only bode well for the country as a whole, yet will the majority of globally-established corporations stick around for the crunch, as I can only sense that the worst is yet to come. The South African motoring industry continues to bear the brunt of weak government decisions and just how long will it be before carmakers pack up and leave? I also have no doubt that the major players in the worldwide industry will closely study this move and are silently watching for slip-ups on our side (be it the incompetence of government, suppliers, Eskom or our production facilities and workforce). Is it possible that there is something of a trend in South Africa producing fewer cars and more vehicle components? Ford’s investment could spell the end of this trend, though it left me thinking, a lot (I wonder if we’ll see more Ford-branded government fleet vehicles in the near-future). It might be because of my line of work that I’m reading way too much into this…time will tell.
To view the news story about Ford’s R1.5 billion investment click here
