South Africa plans to start a $735 million automotive-supply park south of Durban in 2018, one in a series of positive developments boosting the country’s fast-growing auto industry and a cause for celebration in a struggling economy.
In a recent show of confidence for the country’s auto industry, Japanese car manufacturer Toyota invested 6 billion rand ($384 million US) in the Durban economy, this week opening a plant to produce Hilux and Fortuner models, SABC reported.
Fortuner is a mid-sized SUV that has been a best seller in its category in Thailand and the Philippines, and is hugely popular in India. The Fortuner is not offered in Japan, Europe, North America or China. Hilux is a series of light commercial vehicles. As of 2014, the Toyota Hilux was available worldwide except Japan, U.S., Canada, North Korea, South Korea, and India.
South Africa’s auto manufacturing industry has the potential to increase production by up 50 percent by 2020 with a stable government, supportive policies and no labor disruptions, according to a local stakeholder, Bloomberg reported.
“It’s feasible,” said Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa in a Bloomberg interview. “We’ve factored into that estimate or target the possibility of new entrants coming into this market.”
The new Toyota facility is world’s second-largest producer of the models after Toyota’s plant in Thailand.
The new plant in Durban, third largest city in South Africa, is expected to add 4000 jobs in KwaZulu-Natal’s auto industry.
South Africa’s auto industry is one of the top 25 global markets, contributing around 7 percent of the country’s GDP, according to IndependentOnline.
The auto industry is growing in importance and its contribution to South Africa’s GDP is forecast to rise to 10 percent by 2020, said Mike Whitfield, managing director of Nissan South Africa and president of the National Association of Automobile Manufacturers of South Africa.
The country’s auto manufacturers produce 600,000 vehicles a year, supporting more than 100,000 manufacturing jobs.
Toyota’s new plant demonstrates the confidence that global automotive producers have in South Africa as an investment destination, President Jacob Zuma said Tuesday at the plant opening.
The South African government’s auto incentive program has attracted companies such as Toyota, Ford Motor Co. and BMW AG to set up factories and invest in creating jobs in an economy with unemployment exceeding 26 percent, Bloomberg reported.
Toyota’s investment is three times more than Ford has invested in the local industry,EyewitnessNews reported. The plant opened just days after BMW South Africa announced it will begin building a new body panel plant later this month as part of its own 6 billion rand investment in its South African operations.
Kwa-Zulu Natal province last week bought 1,000 hectares (2,470 acres) of farmland for the country’s $735 million automotive-supply park south of Durban, according to Footprint2Africa. It will target suppliers including those already working with vehicle manufacturers in the country, said Mike Mabuyakhulu, provincial head of economic development, at the Toyota plant opening.
The South African government has started working toward expanding support for the auto industry and hopes to complete the new plan by March 2017, Zuma said.
The industry is one of the few growth sectors in an economy growing at its slowest pace since 2009. Investment and production growth are primarily driven by export demand, with shipments expected to be at 375,000 vehicles this year, Bloomberg reported.
Production is expected to increase to 682,000 vehicles in 2017 compared to 616,000 in 2015, Vermeulen said. A planned investment by China’s Beijing Automotive International Corp., which will build a manufacturing plant in the southern coast city of Port Elizabeth, will help bolster production, he said.
South Africa should also review vehicle taxes, improve fuel quality and consider incentives for hybrid and electric vehicles, Vermeulen said.
The next phase of government policy will aim to integrate local companies, especially small black-owned companies, into the supply chain, Zuma said.
“I know that Toyota is very aware of this imperative,” he said. “The current situation where black participation in the automotive value chain is mainly at employee (level), rather than in business ownership and control, can and should drastically improve.”