Your Excellency Mr Yoon Lee, Ambassador of the Republic of Korea, representatives of other foreign missions in SA,
Mr Byung Tae Yea, executive vice president of Hyundai Motor Company
Mr Jacob Lee, General Manager for Commercial Vehicles at Africa & Middle East Regional Headquarters in Dubai,
Mr Alan Ross, CEO of Hyundai Automotive SA,
Mr Wade Griffin, Director: Commercial Vehicles of Hyundai Automotive SA,
Management and workers at the Hyundai plant,
Colleagues from dt led by the CD Mkhululi Mlota and the IDC Mazwi Tunyiswa,
Members of the media,
Ladies and gentlemen.
Good afternoon,
It is my pleasure and privilege to represent the Department of Trade and Industry at this very important occasion. I bring an apology from the Minister of Trade and Industry, Dr Rob Davies.
On behalf of the South African Department of Trade and Industry and the Government of the Republic of South Africa, I would like to congratulate Hyundai Automotive South Africa and all those involved, the management and all the staff on this very important occasion – the launch of this new facility.
At the same time, to warmly welcome you to our country. We are honoured to be home to this facility and as government we commit to providing the necessary support to ensure its continuing growth and sustainability.
We have marvelled at the success story of the Hyundai Group and its role in the development of the modern Korean economy. From the first days of your legendary founder, Chung Ju Yung, Hyundai followed the long, hard road from early beginnings into a global automotive giant at the frontier of technology. It is no accident that this path co-incided with the emergence and growth of the Korean economy, which at the outset had little or no experience of vehicle production.
Along that road, the so called 'Miracle of the Han River' was no miracle at all. Both the success story of Hyundai and the Korean economy is, if I may say so, a product of emulation, experimentation, trial-and-error, learning by doing, export discipline – and very hard effort and learning - working 24/7, 365 days of the year.
The success of Hyundai and other Korean companies was enabled by a determined and consistent Korean industrial policy that was committed to the purposeful industrial development including the development of critical value and supply chains in steel-making, shipping, electronics and automotive sub-component development – all of these tied together by factory-based learning and the drive for export competitiveness. It was also characterised by a very close, mutually beneficial working relationship between government, business and labour.
South Africa has come to understand more and more how much it has to learn from the Korean example. Of course our own historic industrialisation path, based on mineral extraction, raw material export and cheap energy, is very different from Korea’s. But the Korean example serves as a continuous reminder to us that we can and must break out of our dependence on commodity extraction and exports, as much as this is a vital sector of our economy. A value adding manufacturing led growth path is critical if we are to break out of this dependence and overcome the triple challenge of unemployment, poverty and inequality.
But, just as in the case of Korea, SA will need to ensure that our industrial development strategy and policies are attuned to the needs of the private sector and support foreign direct investment. We will need to ensure that our comparative advantages especially our enormous resource endowment is used to build global competitive advantages especially in the manufacturing sector.
We will need to ensure that greater levels of export competitiveness by companies domiciled in South Africa complement government support including incentive support. In other words build our capabilities, overcome our skills constraints and utilise our geographic location to optimise export opportunities in the new global growth frontier on the African continent.
The launch of this assembly plant comes at an opportune time. Foreign direct investment across a range of manufacturing sectors is significantly up. In the automotive sector our industrial policy instruments have supported investment of R16 billion in the recent period with further investment in the pipeline.
Over the past 7 years government has invested significant resources in our manufacturing sectors – most notably, in the context of today’s launch event, in our automotive sector. As we certainly won’t need to remind the leadership of HMC, this is because of the sector’s strong forward and backward linkages across industries like steel, leather and chemicals and because of the significant spill over effects in the sector.
As part of these efforts government has recently extended support to the medium and heavy commercials vehicles segment of the sector with a view to supporting and incentivising the migration of the industry to Complete Knockdown (CKD) kits – an important staging post in the development of automotive manufacturing capability with which HMC will also be very familiar.
We are confident that this new plant will provide all of you at Hyundai Automotive South Africa (HASA) with a very good base from which to begin your manufacturing journey in Southern Africa - and we are particularly encouraged by the localisation effort that has already been put into place in the form of the 1st-tier supply bodybuilding plant operated by Taylormade Truck Bodies (Pty) Ltd.
Government will provide the necessary support to ensure that this investment is sustainable beyond its present model of SKD, moving we are confident to CKD and in time with strong supplier development and localisation. In short the dti will continue to work closely with Hyundai SA towards achieving all the necessary milestones towards full CKD operation and to enable Hyundai to reach much greater levels of localisation.
Momentum is steadily picking up in the SA auto industry. The Department of Trade and Industry is dealing with an increased numbers of enquiries from international automotive companies in the automotive sector requesting more detailed information on the regulatory environment in South Africa and wishing to expand their existing capabilities or with respect to new investment. I believe this is a testament to South Africa’s recent track record in world class automotive manufacturing, built on high quality locations, strong logistics and the skills and dedication of management and the local labour force.
To further build on this base, you will already know that the Department of Trade and Industry is a long way down the road in a thorough ‘root-and-branch’ Review of the Automotive Production and Development Programmed (APDP) aimed at streamlining and dovetailing the various instruments of this programme. The Review has been done in close collaboration with all the industry players - NAAMSA and NAACAM, individual OEM’s, component manufacturers and labour.
In short all views and proposals have been ‘on the table’ and will be taken into consideration. Minister Davies will be reviewing these synthesised proposals shortly and government will make an announcement in this regard later in the year or early in the New Year.
The overall aim of our policy for the auto sector remains to create the right environment for the steady migration of our motor industry from mainly an assembly base characterised by low volume production; geared mainly towards the domestic market - to a globally competitive one.
This means an industry exhibiting much greater economies of scale and capable of producing vehicles at competitive price levels for both domestic and international markets. The medium term focus of the revised APDP will be on significantly increasing the volume of local vehicle production by 2020, and most importantly securing much greater localisation of component manufacture higher up the value chain.
Opportunities
The Hyundai brand has of course been in our market for more than 14 years, providing both passenger and commercial vehicles. However government takes Hyundai's decision to locate this new SKD assembly plant in Benoni as a clear vote of confidence in South Africa’s evolving industrial policy, the overall health of its auto sector and the skills and capabilities of the people of Benoni and Gauteng province. At the same time, we see today’s HMC plant opening as the first step towards a potentially much wider set of regional expansion opportunities.
South Africa has the largest autos market in Africa as a whole and in 2011 the truck segment was estimated at 340,000 units representing a 30% share of the 1, 1 million combined production for the Sub Saharan African market as a whole.
South Africa is also, of course, a natural gateway to the wider African market - a market that has seen consistent economic growth surpassing 5% on average over the past decade. The African continent is home to some of the fastest growing economies in the world and there remains great potential for further growth - particularly in the transport of goods as trade volumes increase.
In support of this growth momentum in the continent, the Regional Economic Communities of SADC, COMESA AND EAC are in negotiations towards a Free Trade Area that would span 26 countries with a combined population of 600 million and an overall GDP of approximately 2 trillion USD. However it is critical, contrary to recent views expressed recently in the commercial press that our efforts are not simply about exports.
It is vital that trade facilitation and agreements are matched with a strong commitment to regional industrial integration. This is why for example the Department of Trade and Industry has been working closely with the Nigerian authorities in a process facilitated by former Minister Alec Erwin to support the development of an automotive sector in that country. The African market is increasing rapidly.
There is everything to be gained and nothing to lose by the SA government working closely with African countries and global automotive companies to scale up African assembly and production with accompanying localisation and value addition. This will lessen the dependence upon imports from other jurisdictions; build complementarities between various centres of production; increase economies of scale and enable significant economic spill over effects including, building local capabilities and skills. Co-operation and industrial integration makes sense. It is not about standing in the way of the efforts of other African countries industrialisation efforts.
As Government, we are today unambiguously offering companies like yourselves a secure platform for future expanded production, value addition and participation in regional trade and regional industrial integration, underpinned by policy certainty and a strong commitment to transparent cooperation.
We will carry on supporting the auto industry through continuously evolving programs, chiefly focussing on the following two major areas:
- investment support targeted to encourage both greenfield and brownfield investments by OEMs and component suppliers; and
- Revitalised and well-resourced Export Councils - which will continue to facilitate export promotion by providing the necessary cutting edge market intelligence and technical and marketing support for all aspects of export activity.
We wish Hyundai Automotive South Africa all the best and may this investment be the beginning of a long and enduring stay in our country. We at the dti are confident that we will be able to discover more and more effective forms of co-operation between the respective economic interests of our two countries and the leading firms within our economies.
This should include new and creative forms of mutually beneficial cooperation - a far cry away from historical patterns of development, which created dependencies rather than mutual benefit. One described by South Korea’s much-respected economist, Ha-Joon Chang as using industrial policy for early take-off and then “kicking the ladder away” with once size fits all policy formulae imposed on others.
Welcome to Benoni.
Thank you!
