The Nelson Mandela Bay automotive sector is under severe strain, with industry leaders citing a lack of an enabling environment, inefficiencies at the city’s two ports and ongoing political instability as major obstacles to growth.
The challenges have been compounded by global geopolitical shifts and, more recently, the impact of the US tariffs on international manufacturing operations.
In a bid to attract new investors despite the economic headwinds, the Nelson Mandela Bay Business Chamber will promote the metro as a prime investment destination at the 9th Tokyo International Conference on African Development (TICAD 9), taking place from August 20-22.
Chamber chief executive Denise van Huyssteen will be accompanied by representatives from Jendamark and Sovereign Foods.
Van Huyssteen said they were deeply concerned about the state of the local economy, in particular local manufacturing, which had been under pressure for a number of years due to various factors.
“All of these developments have put local manufacturing in a position where it is exceptionally challenging to be sustainable and competitive versus other locations around the world, including on the African continent,” she said.
“The tariffs are just another layer in contributing to the already very difficult position of manufacturers.”
SA was hit with 30% tariffs by the US on August 1, which is expected to have far-reaching implications for companies exporting to America.
Among the four original equipment manufacturers in the province, Mercedes-Benz SA is the most exposed to US tariffs with the export of its C-Class model.
Van Huyssteen said manufacturing was the anchor of the local economy with the automotive sector being the major contributor and creator of employment, followed by other types of manufacturing such as pharmaceuticals, beverages and agro-processing.
“Our automotive industry is anchored by the OEMs [original equipment manufacturers] which undertake a completely knocked down (CKD) assembly in SA,” she said.
“These OEMs are responsible for creating well over 100,000 jobs at their own operations and within their components supplier networks.
“Further, it is estimated that the knock-on employment impact of these OEMs and components manufacturers results in over 500,000 formal jobs being created across the entire automotive supply chain.
“Around 40% of automotive employment in the country is located in the Eastern Cape.”
The chamber’s analysis indicated that thousands of jobs within the local manufacturing sector were at risk.
She said the current situation required municipalities to maintain and upgrade electricity, water, sanitation and roads infrastructure, while ensuring that these basic services were reliably delivered and at the right levels of quality to businesses.
“Nelson Mandela Bay has the advantage of having two ports, one of which is a deep water port located on 9,000 hectares of prime industrial land,” Van Huyssteen said.
“However, for a number of years, port inefficiencies, along with the deterioration of rail transportation, has directly impacted the ability of manufacturers to get their products to market timeously and cost effectively.
“South African manufacturers already have the challenge of being a great distance from many of the markets, which means that the proportion which they pay for logistics costs is higher than in other locations.
“Political instability has caused many of the country’s municipalities, including among the major metros, to become unstable and unable to deliver basic services.”
Aside from the tariffs, Van Huyssteen said a lack of speed in implementing policies had also made SA a high-risk environment for investors.
“This means multinationals have been holding back on investing in SA, which in turn has affected the ability of local manufacturers to invest in new technologies and machinery, which means that the operations are less efficient versus other global locations.
“Ultimately, investors require policy certainty so that they can make longer-term decisions, as well as an environment which is politically and economically stable and predictable.”
She said SA did not have any specific free trade agreements in place with Brics markets.
“Our trade with these countries tends to be orientated around SA providing raw materials — and these countries in turn providing us with finished manufactured products.
“There needs to be an urgent and concerted focus to change this equation so that it becomes more balanced, enabling SA to provide manufactured goods.”
This would enable the retention and creation of meaningful local jobs.
“It is absolutely essential that the government moves to strengthen trade relations with existing key markets such as Europe and Southeast Asia.
“This must be directed at retaining and growing mutually beneficial trade opportunities.
“Along with this, we need to accelerate the African Continental Free Trade Agreement to get collaborative trade going — especially with a focus on Sadc [Southern African Development Community] and Sub-Saharan Africa markets.”
Van Huyssteen said with the tariffs in place, more countries would shift to protect their own interests and domestic economies.
“Multinationals will also adjust their manufacturing footprints to assemble in markets where they can do so more efficiently and competitively.
“SA has also lost ground in Africa, with Morocco already building more vehicles and other countries having ports which are more competitive than ours.
“Adding to this, along with Algeria and Libya, we now have among the highest tariffs on the continent.”
She said it was vital that all SA stakeholders united behind a common vision of retaining manufacturing and employment.
“This requires speed and action to address issues under the control and influence of local and national stakeholders.”
On the upcoming trip to TICAD 9 in Japan, Van Huyssteen described it as a defining moment for the metro.
“We are showcasing Nelson Mandela Bay not only as a gateway to Africa but as a future-focused diverse manufacturing and innovation hub with untapped potential,” she said.
“We’re not just promoting trade but also bringing a message that the Bay is a place of innovation and change, and is open for business.
“The Bay has the potential to lead Africa’s industrial regeneration, and this is ready to be leveraged and unleashed.
“This is about repositioning, strengthening and reinventing our current manufacturing and other sectoral strengths to retain and grow investment and employment opportunities in the Bay.”
The Herald
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