Factories hit hard by uncertainty

2017-05-22 14:32
Weak economy and politics 'pack one hell of a wallop'.

Weak economy and politics 'pack one hell of a wallop'. (File)

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General Motors (GM) may claim to be disinvesting due to a global restructuring, but there is no question the weak economy and political uncertainty have hit the local manufacturing sector hard.

GM said their decision to disinvest was not influenced by local economic or political decisions.

“We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities,” GM’s executive vice president Stefan Jacoby said.

GM is also pulling out of India and East Africa, and follows an exit of Australia in 2013, Europe in 2017, and other recent plant closures in Asia.

Recent pronouncements indicate their focus in future is in the development of autonous vehicles, electrification and connectivity.

Notwithstanding this, there is no question that manufacturing in this region has received “one hell of a wallop” from the weak economy and political uncertainty, said Pietermaritzburg Chamber of Business chief executive officer Melanie Veness.

While some companies continue to do well due to factors such as an ability to raise exports, or through restructuring, many manufacturers in this region “are teetering” financially due to the weak economy, and there have been some factory closures, said Veness.

The closures don’t just cause job losses at the factory, but also affect downstream manufacturers that once supplied the factory.

She said she had heard of countless expansions being put on hold, and orders cancelled, following the recent cabinet reshuffle by President Zuma.

Manufacturing Circle CEO Phillipa Rodseth said in reports this weekend the withdrawal of GM is unlikely to be the start of a larger divestment from the heavily incentivised automotive sector.

However, it will cause a second year of falling employment as it represents the most advanced part of the manufacturing sector.

She said there was no reason to think other motor manufacturers were planning to leave. Multinational companies change their strategies, she said.

The Witness transport writer Alwyn Viljoen shared this view of GM’s decision: “We mustn’t take this personally. It is all part of a global trend to build autonomous, electric urban vehicles for people who don’t want to own cars anymore, but rather pay to share a ride.

“We don’t see this much here yet, but sales of cars to young people in big cities are falling around the world. Millenials use ride hailing or public transport. Robotic, full electric minibuses that recognise and interact with passengers will increasingly begin to transport people,” Viljoen said.

Japan’s Isuzu Motors will buy GM’s bakkie assembly plant in Port Eizabeth, but, according to reports, the impact on the 1 500 people employed by GM South Africa remains unclear at this stage. Trade and Industry Minister Rob Davies, in a statement issued after the GM announcement, expressed “regret and concern” for the employees whose jobs may be affected.

Davies said GM has had difficulties in this country since 1994 including:

Its plant did not meet the initial annual minimum production volume of 50 000 units set under the Automotive Production and Development Programme since 2013.

Sales have been sliding for five years.

Exports remained low.

Davies said the industry is finalising a “Master Plan” to grow local vehicle production, and an announcement about it can be expected in early 2018.

Local vehicle sales have declined for the past three years. New vehicles sales, according to the National Association of Automobile Manufacturers of South Africa, fell 11,4% last year to 547 442 units, the third consecutive year of decline. The slowing economy, pressure on consumers’ disposable income and rising prices of vehicles are among the main reasons for the drop in sales.

Read more on:    pietermaritzburg

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