Labour instability could chase away more local automotive component makers and add to the total losses of jobs and earnings from those in the sector that left the country last year, the industry warned.
Robert Houdet, executive director of the National Association of Automobile Component and Allied Manufacturers, said that as long as labour stability was an issue, companies could disinvest from the country or relocate elsewhere.
Many industries, including the automotive industry, have been negatively impacted, particularly in the past two years, by lengthy strikes that have crippled production.
Last year the Automotive Leather Company relocated from Rosslyn in Pretoria to Lesotho while wiring harness producer Kromberg & Schubert and some automotive operations of Johnson Controls relocated to Botswana, apparently to take advantage of cheaper labour costs in those countries.
Houdet said labour-intensive automotive component suppliers found it more worthwhile to relocate to these countries.
“This is a warning to South Africa that should there be labour instability, countries that provide labour stability will become more attractive,” he said.
Houdet added that Botswana exported all its wet blue animal hides to South Africa for processing and labour instability in South Africa might encourage the production of leather seats in Botswana.
He said vehicle assembly plants could not be stopped because this sent the wrong signal to international investors that South Africa was an unreliable source of vehicles while South Africa was denominated an unreliable supplier if it did not supply components on time.
“Both ways it’s very dangerous. Delivering on time is non-negotiable in the automotive industry and labour stability is crucial to keep delivering on time. If you cannot deliver on time, overseas buyers will find an alternative source.”
However, Houdet said South Africa was still able to attract new suppliers to invest in the country despite there not being much attraction for new investors in a small volume market.
Automotive Industry Development Centre Eastern Cape managing director Lance Schultz said many suppliers were struggling to remain economically viable despite their measured productivity and manufacturing benchmarks matching or exceeding many global peers.
Schultz said the industry supported more than 40,000 jobs in the Eastern Cape but input costs, particularly the rising cost of electricity and water and logistics, as a result of large distances to markets, had brought into question the sustainability of many suppliers.
Automotive component exports rose by 8.3% – from R42.2bn in 2013 to R45.7bn in 2014 – according to the latest SA Automotive Export Manual.
Norman Lamprecht, the executive manager of the National Association of Automobile Manufacturers of South Africa, said contributing factors that supported automotive component exports last year included a weakening rand exchange rate, year-on-year vehicle production gains in the industry’s top export destinations, the domestic component suppliers’ production flexibility advantages and South Africa’s trade arrangements.
“The integration of the South African automotive industry into the global automotive environment has increased its export expansion as well as its degree to improve competitiveness.”