President of SAVRAL, Marc Corcran,
CEOs of Car Manufacturers,
CEOs Car Rental Companies,
CEOs of Retail Motor Industry,
Ladies and gentlemen.
It is a known fact that the fleet rental and leasing industry continues to be the principal contributor and beneficiary of our ever growing economy with a combined footprint of more than 600 branches countrywide.
Your services are very crucial in the sustainability of our economy, especially the tourism industry, as your members provide short-term self- drive rental, medium and long term services to corporate users and consumers.
Programme Director,
This industry also contributes immensely to service delivery and drives government. The National Department of Transport currently has the biggest Public Private Partnership contract with Phakisa World Fleet Solutions, which is one of your members, to provide Government with full maintenance lease of vehicles and short term vehicle rentals for 13 Departments.
The fleet consist of 1933 vehicles on Full Maintenance Lease with 51% being Sedans and 39% as LDV’s (Light Delivery Vehicles), and the rest of the balance is made up of trucks, buses and mini buses.
Ladies and Gentleman
Just to give you an idea, in September 2014 alone, these vehicles travelled a total of 5, 8 million kms at a total cost of 18 million rand per month excluding fuel. About 2243 short term vehicle were also rented in September for a total of 6093 days at a total cost of 4, 1million rand.
After reading these figures, I’m sure you are in no doubt of our commitment as Government in support your industry. We are also very much pleased as government that you have also created 12 000 direct jobs for our people.
Ladies and Gentlemen,
I’m also very much aware of the fact that SAVRALA has the associate members that comprise of manufacturers, importers, allied industry sales and service companies.
As stated in your website, SAVRALA is instrumental in steering these collective industries’ standards and are committed to raising the professional profile of these industries. In fact the reason why we are gathered here, amongst others, is to announce the “manufacturer of the year”.
So I do regard tonight, as the night dedicated to the manufacturers in your calendar of activities. This I would want to believe is not coincidental, because we also view the manufacturers as crucial players in the country’s economy. So tonight I would like to take a moment and raise a few matters relevant to this sector of our economy. But I also want to touch on the
issues that confront us with regards transport infrastructure funding, pricing and regulation, as well as traffic management. The issues in one way or another do affect us all.
Automotive Manufacturing
Just to kick off, I am well aware of the tremendous achievements of the motor industry in recent years. I have seen the remarkable progress the industry has made – in design, safety, in new lean manufacturing systems, just-in-time delivery, and meeting the needs of consumers.
The rise in vehicle population every year bears testimony to this fact. Just over a year ago, more than 550 000 vehicles came out of our production lines, and some of these vehicles are obviously part of the vehicle population on our roads today.
These achievements are not just reflected in car assembly plants, but are also reflected among component suppliers, technology companies, and in dealerships as well. That is why – at a time of global economic uncertainty– it is the welfare and competitiveness of the South Africa’s motor industry that I and my colleagues in government are focused on at most times.
Ladies and gentlemen,
The automotive sector remains a critical segment for most economies because of its cross-cutting linkages across several industries and services as well as its documented contribution to various economic development imperatives. The production of a vehicle incorporates a wide range of industrial activities and as such the sector is South Africa’s leading manufacturing industry, contributing almost 7% of the country’s more than 3, 4 billion rand GDP in 2013.
In 2013, almost 100,000 people were employed in the manufacturing of vehicles and components with a further 200,000 employed in the retail and repair segments. As I mentioned earlier, the total vehicle production volume in 2013 was approximately 550,000 vehicles compared to 540,000 units for 2012. But as you may be aware, there are also a great number of imported automotive products in South Africa, leading to a trade deficit of 49.2 billion rand in 2012.
Ladies and gentlemen,
As government we have always maintained that at full potential, your industry can create 160,000 direct jobs in the period up till 2020. It is against this background we introduced the Industrial Policy Action-Plan which forms one of the principal pillars of our New Growth Path.
We believe that this policy will bring about significant structural change to the South Africa’s economy. It will also change our growth path which was led by the consumption driven sectors, with an economy that was import intensive especially with respect to value added products. Our view is the fact that stronger domestic growth in the manufacturing sector is imperative.
With this new Industrial Policy, our focus is on value added production with state support centred on nurturing and defending industrial development. It is also based on need for sustainable long-term development that is underpinned by higher growth, exports and labour- intensive, value-adding economic activity in the production sectors, led by manufacturing.
The introduction of this Policy has also brought with it the introduction of the Automotive Production Development Programme (APDP) with two key objectives to raise volumes to 1.2 million vehicles per annum by 2020 and to substantially diversify and deepen the components supply chain.
This obviously does require the on-going increases in minimum plant volume thresholds and identification of areas where greater economies of scale in component sourcing are possible. All of this needs to be done on the back of South Africa continuously developing itself as a globally competitive destination for automotive investment and production.
The medium and heavy commercial vehicle (MHCV) sector has also received its fair share of policy attention. A number of opportunities are being exploited to resuscitate bus production in South Africa through boosting the roll-out of the Bus Rapid Transport Systems in Metros and implementing the revised state preferential procurement framework. Three hundred buses have for instance been procured with local requirements. Major contracts have included:
- Mercedes-Benz SA’s successful tender to provide 134 buses for phase 1B of Johannesburg’s Rea Vaya BRT system
- Volvo SA’s successful tender to provide 40 new vehicles to the City of Cape Town for its extended MyCiti bus routes, at a cost of R180m
- MAN supplying 80 new commuter buses to Great North Transport, Limpopo’s largest public transit operator.
- In terms of investments, the manufacturing industry has also committed to invest 4.5 billion rand in manufacturing plants and automotive supplier plants.
- Major companies including Iveco announced the formation of Iveco South Africa Works, a new 60:40 joint venture partnership between Iveco and local public transport operator and bus manufacturer Larimar group. The plant in Rosslyn will assemble an initial 5,000 units this year, with the creation of more than 1,000 new jobs.
- I’m aware that Toyota for instance has invested in a manufacturing facility to produce a new model Toyota Corolla at the company’s Durban plant.
- Mercedes-Benz SA has escalated its total investment in SA to over
5 billion rand, underpinning an increase in its local output to 100,000 units a year and creating 800 new jobs. The production of the new C-Class has already started at Mercedes’ East London plant, with high number of units being produced. - General Motors South Africa (GMSA), in partnership with component manufacturer Tenneco South Africa (SA), were awarded a 6 billion rand contract to export catalytic converters to North America.
Ladies and gentlemen,
Notwithstanding such achievements, the industry also faces a number of challenges. Economies of scale in assembly and the depth of domestic component manufacturing are not yet internationally optimal. I’m aware that a relatively small number of automotive components dominate the export market and local content has tended to slow.
To address this issue, as Government we have launched an Automotive Supply Chain Competitiveness Initiative (ASCCI) in 2013 to enhance localisation, production and supplier capabilities which is proving to be successful and continues to drive various competitiveness improvement interventions across the domestic automotive value chain.
For instance, the Automotive Export Manual Report 2014 shows that vehicle and component exports have increased by 8.2% from 94.9 billion rand in 2012 to 102.7 billion ran in 2013. For the first time last year, the industry exceeded the 100 billion rand mark.
But like many industries globally, the manufacturing industry is also faced with the challenges of climate change, with heightened demands for products with lower emission levels. A strong focus will need to be placed on ensuring that your technological developments are incorporated throughout the South African production landscape, with particular attention given to the opportunities presented by the design of the Electric Vehicle Roadmap.
Transport Infrastructure Funding
This brings me to the issue of our transport infrastructure investment as the Country. As you are well aware our transport infrastructure has suffered from decades of under investment. And at the same time it is coping with the demands of a growing economy. I have touched briefly on the fact that your industry has committed to invest in manufacturing plants and automotive supplier plants.
I have also touched on the tenders that have been won for the manufacturing of busses for the bus transit system. But let me also say that in terms of our public transport strategy and plan we have made huge investments specifically on public transport infrastructure where these buses will operate.
We have invested over 25 billion rand on the construction of Integrated Public Transport Networks which includes BRT systems in Tshwane, eThekwini, Rustenburg, Polokwane, Nelson Mandela Bay, George, Ekurhuleni and Mbombela. Johannesburg and Cape Town are already operating and expanding their networks with Rea Vaya reaching Alexandra and Sandton. MyCiti is expanding to Khayelitsha, Mitchell's Plain, Lansdowne, Wynberg and Claremont.
Currenty, about 100 000 passengers are being transported daily on this system. By 2017 we expect 200 000 passengers a day on Rea Vaya and 120 000 a day on MyCiti. With additional cities beginning to operate, we expect this number to double to 200 000 by 2016 and 300 000 by 2018.
We have built over 120km of dedicated lanes and nearly 100 bus stations. With regards to the taxi fleet, since the launch of the Taxi Recapitalisation programme in 2006, 59 386 old taxis have been scrapped and 3. 3 billion rand scrapping allowance has been paid to the taxi operators. More importantly, the manufacturing industry has been very instrumental in replacing these old taxis with new safer taxi vehicles that contains safety specifications.
Ladies and gentlemen,
Efficient movement of passengers and freight is essential to our economy. For instance, almost 80% of all domestic freight is carried by road. We depend on it every day to provide us with goods from all over the world at competitive prices. Our continued future economic growth and prosperity therefore depends on our road infrastructure.
Ladies and gentlemen
The problems we face today, because of past under-investment, are compounded by the daily pressures on the road transport system that come from a growing economy. We are increasing the level of investment and importantly, maintaining these high levels over the years to come.
We have for instance over the past 5 years spent over a 250 billion rand on transport infrastructure. Our total spending over the next 3years will exceed billions of rand.
We however think that this increase spending is essential for your industry. We are increasing capacity where it is necessary. For instance, good road links are vital to the future development of our network of airports, particularly major airports such O R Tambo and Cape Town. In addition to passenger growth, more and more freight is arriving by air and needs to be transported to its destination. Our plans have ensured that growth in airport capacity is matched by improvements in road infrastructure.
With the right long term strategies in place, effective management, backed up by continued investment, by both Government and Private Sector, we can put in place a sound infrastructure that will support our future prosperity. We however need to work with you in partnership.
Pricing Strategy and Regulation
Let me also say that the issue of transport infrastructure funding is an issue that needs to be discussed by the country as a whole. This indeed is a matter that requires thorough discuss and the private sector needs to play its part. Currently our funding model is through the fiscus. For instance, our road networks are composed of two portfolios consisting of the non-toll and the toll system.
The non-toll is funded through the allocation from the National Treasury. While the toll network is funded through SANRAL bonds that are auctioned and available as guaranteed and non-guaranteed bonds. The toll network also has the component of Public Private Partnership. These are roads managed by a private sector concessionaire responsible for the design, build, finance, operate and maintain for 30 years.
SANRAL has also implemented the most extensive open road tolling system under the newly constructed Gauteng Freeway Improvement Project. This is currently the policy of government.
Ladies and gentlemen,
We need to ensure that we look at the current funding models for the total transport infrastructure so that we are able to raise enough capital in this regard. Secondly, we must also look at the feasibility of pricing within the transport sector as a whole. My intention is to set a framework for taking this debate forward.
We need to be able to ask one key question. What sort of pricing regulation system do we need and what sort of benefits would it bring. I would like to believe there are different forms of pricing that we could take, so we need to look at those options. For instance our ports regulation is one example where the system has worked.
The airports tariff regulation is also one good example where it has worked. So we need to look at available ways to determine pricing and construct an affordable system that would work. But moving to such a system will not happen overnight. It would need careful long term planning.
So, in short, these are some of the things that the Department of Transport will be doing in the coming months and of course, these will happen in consultation with various industries within the transport sector, including yours. There will be hard choices and difficulties along the way. But we need to face up to all these challenges. And we are asking everyone to help us to carry the debate forward, including the automotive sector. Let’s open this conversation on social and economic road infrastructure funding.
Road Safety
Ladies and gentlemen, before I conclude, let me also touch on the issue of traffic management and road safety. While our economy is changing the mobility status of our people, more challenges are also arising from our economic growth.
The vehicle population increase has complicated our problems of traffic congestion particularly in the metropolitan areas. Road accidents continue to take more than 14 000 lives on our roads every year. This has also translated into billions of rand costs to the economy.
But as government we continue to discharge our responsibility in this regard. Our mandate in this regard is founded on better ways of traffic management, better education, better engineering, and better enforcement.
We continue to ensure effective enforcement, stringent penalties, and hard hitting advertising campaigns to raise safety awareness. We also continue to ensure responsible driving, safer drivers and also creating a culture of extended and advanced driver training. We are therefore proud as government that we have introduced among other things:
- The implementation of the eNatis system which synergised all our licensing management system.
- The establishment of the Road Traffic Infringement Agency to focus on road traffic violations.
- The piloting of the AARTO system in Johannesburg and Tshwane.
- The educational programmes to raise the level of road safety awareness and translating that into correct road user behaviour.
- The improved data coordination on the capturing of information on road crashes, injuries and fatalities. This information is now being used for planning and identification of hazardous roads to enhance our road safety strategy.
- Steps are also being taken to formalize and regulate the driving school industry. This will mean strict accreditation and registration criteria for owners, clearly defined customer service standards and higher level of technical knowledge and driving skill for driving instructors.
- We are also in the process of introducing periodic motor vehicle testing for vehicles 10 years and older every 24 months so that we ensure the fitness of vehicles on our roads.
Finally, we are far advanced with the proposal to include the requirements that heavy vehicles and public transport must be fitted with speed governors. This will ensure that there is a reduction of accidents where speed is a contributory factor and to ensure that these vehicles are traveling and governed within the prescribed speed limit.
Conclusion
At this point I would also like to plead with manufacturers to consider factory speed limitation of such vehicles so that we do not have to go through the trouble of speed governors.
Ladies and gentlemen,
Quite frankly, as governments we have long made road safety a priority and we do not plan to slacken our efforts in this area. We are currently consulting on plans to improve the regulations even further. Our aim is to protect the responsible majority of drivers, and crack down on the reckless one. We also continue to run targeted campaigns, to keep in the public eye the safety message.
Ladies and gentlemen, I’m very conscious of the fact that the only thing standing between you and your dinner is me, so I won’t keep you any longer.
So, in conclusion, I would ask you once again, to join me, in paying tribute to the worthy recipient of the manufacturer of the year award.
I thank you!
