Mr Frank Peter Arndt
Mr Bodo Donauer
Chairperson Mbete
Friends and colleagues
Ladies and gentlemen
About sixteen months ago, government adopted a New Growth Path that set out the storyline of an economy brimming with opportunity, on a continent that is registering some of the fastest growth rates in the global economy.
We spelt out a vision of an economy that rediscovers its roots in manufacturing, mining and agriculture – in sectors with high labour absorbing capacity – and combines that opportunity with R&D and technology, skills development and above all, an advanced economic infrastructure.
We committed to a programme to widen and deepen markets and promote greater social equity for all South Africans.
We pointed to the strengths of the African continent: a consumer base of one billion people, enormous resources of natural resources, a youthful population, a great climate for solar and wind energy and a growing optimism about the future.
Today’s launch of the production of the new 3-series BMW and the investment of R2.2 billion by the company, is a private-sector vote of confidence in our economy.
Ladies and gentlemen
Production at BMW plant in Rosslyn goes back to 1968, when it began assembling cars, and in 1973, BMW AG took over full shareholding and established BMW South Africa (Pty) Ltd. with the Rosslyn plant becoming BMW’s first manufacturing plant outside of Germany.
So may I welcome the soon-to-be launched new 3-series to a strong, advanced and competitive auto industry. The auto sector is literally an engine of growth. The sector accounts for about 10% of South Africa’s manufactured exports and 5% of total export.
Five hundred and fifty thousand (550 000) cars are produced annually in SA. South Africa has attracted the leading international brand of motor manufacturers not only because of government’s incentives to the sector, but also because the South African industry has consistently met the quality standards required by its parent company.
In the words of Frank-Peter Arndt, when people ask him: What’s the difference between the cars we make in South Africa to those we make at our German plants, the simple answer is that “they are exactly the same”.
BMW SA exports around 85% of its production, with 50% going to the US, 15% to Japan, 5.5% to East Asia, 8.5% to Australia/New Zealand and 5% to Canada.
Current capacity of the BMW plant is 55 000 units, and with the new investment, the company has geared up for the production of the new 3 Series, with installed capacity likely to increase to more than 90 000 units a year.
The new BMW features advanced technology in fuel efficiency and safety.
It will create 600 new jobs in Rosslyn, expanding Tshwane’s position as the largest auto-manufacturing centre in the country, with more than 200 suppliers and a concentration of OEMs in the city.
Infrastructure development
In order to sustain and facilitate growth in exports, the South African government will over the coming years strengthen the logistics and transport corridor between SA’s main industrial hubs to improve access to ports and export facilities.
Cabinet has established a Presidential Infrastructure Coordinating Commission – the PICC – to drive and support the rollout of infrastructure.
To this end significant investment in port, rail and road infrastructure will be developed.
The resultant infrastructure will reduce transport and logistical costs to BMW and other manufacturers, making South Africa a more competitive investment destination.
As a first step, President Zuma announced in the State of the Nation Address, an agreement between Transnet and the Port Regulator to reduce port charges by R1 billion this year, as a means of balancing port utilisation and reducing costs.
Skills development
Government, through the incentive schemes administered by the dti, provides incentives to support skills development and training in the motor industry.
These incentives could help the industry localise skills in research, development and design which is currently undertaken abroad.
While mechanical and electrical engineers are required for the more advanced processes in the development of motor vehicle, the industry will do well to support the training of auto electricians and motor mechanics which are in short supply.
The development of such skills will have positive spin-offs for the industry when qualified independent mechanics source components from the industry.
About six months ago, we signed a National Skills Accord to partner with the private sector and organised labour in the training of artisans, engineers, technicians and technologists: the foot-soldiers of a modern industrial economy.
BMW has considerable experience in investment in deep training on the shop-floor – indeed, the German system of vocational training is an inspiration for some of our efforts. Your company has secured competitive advantage through partnerships at the workplace on training and innovation.
We look to BMW to be a strong partner to government in the implementation of the National Skills Accord.
The MIDP (Motor Industry Development Program) will soon be replaced by the APDP (Automotive Production and Development Program). The APDP will focus on a production incentive that calculates benefits on the basis of actual local production value (local content) and not on material cost as is the current practice under the MIDP.
It is part of a strong and focussed drive to localise manufacturing and to strengthen South Africa as a manufacturing platform for global markets. Our ambition is wider than the auto sector and embraces a number of sectors in manufacturing. Indeed, we have signed a local procurement accord with business, labour and community organisations to support this effort, and published an initial list of products in December that public entities need to procure from local manufacturers.
But we also recognise that the most solid localisation platform is to be a flexible and competitive manufacturing base. This in turn requires investment in skills, know-how and technical capability.
The new incentive is meant to stimulate growth in the automotive industry to 1.2 million vehicles per annum by 2020 with specific gains in the component industry.
As such, the APDP is meant to be a generator of jobs and industrial development.
New technology
South Africa is strategically placed to provide technological solutions to the international motor industry, for example research on diesel particulate filters suggests that its application is not only to reduce emission, but to make use of cleaner metals, such as platinum which decreases carbon footprint significantly.
This new technology has created value-added employment opportunities through the use of raw materials supplied by local platinum mines.
Given South Africa’s competitive advantage in terms of its raw material base, catalytic converters are our most exported vehicle component, accounting for a large part of component exports.
The Green economy and the auto sector
The auto sector is a significant contributor to greenhouse gases, to remain internationally competitive, the sector will have to creatively considering measures to reduce its impact on the environment by:
- Reducing energy consumption in the manufacturing process
- Complying with internationally accepted standards in green manufacturing
- Recycling end of life vehicles
- Embracing technologies that will decrease CO2 emission
- Consider developing electric, hydropower and hybrid engines
- Reduce vehicle weight without compromising on safety
- Improve energy efficiency in internal combustion engines
It is pleasing to note that BMW in developing this new model has succeeded in implementing production processes that dramatically reduces its impact on the environment, which not only result in an environmental but a financial benefit in the form of reduced energy cost.
Conclusion
The government of the Republic of South Africa recognise the importance of the motor industry and the motor component manufacturers to create jobs, grow the economy, export, introduce and develop new technology, skill our workforce and beneficiate South Africa’s raw material base.
It is against this background that we see BMW not merely as a foreign investor in South Africa but our partners in social and industrial development.
