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FEATURE - INVESTMENT IN RAIL KEY TO GROWING SOUTH AFRICA'S AUTOMOTIVE LOGISTICS INDUSTRY
Getting automotive cargo off the road and onto rail and developing South Africa's rail infrastructure to support the automotive industry need to be immediate priorities if South Africa is to fully realise the benefits of the new Automotive Production and Development Programme (APDP), which comes into effect early 2013 and which is aimed at growing all levels of the local automotive industry.
This is the view of Safmarine South Africa's Key Account Manager, Dave Everett, who says that unless Gauteng-based original equipment manufacturers (OEMs), their suppliers, service providers and freight forwarders have access to an efficient, cost-effective rail transport solutions, it would be difficult to foresee the South African automotive industry competing globally against other growing automotive export markets.
"South Africa's automotive industry needs to be globally competitive in terms of the overall vehicle unit production cost and this cost has to factor in the cost of landside transport.
"Because of the typical distance involved in getting cargo to assembly plants, it is important to realise economies of scale by moving large volumes at the same time and rotating containers in a cost effective way.
"This can't be done by road; rail is, and should be, the only option, especially if we also want to use a greener transport solution."
In light of the automotive industry's importance to the South African economy, Everett believes it would also be prudent to consider the specific rail requirements of the automotive industry.
The industry, which employs around 36 000 people and accounts for about 10% of South Africa's manufacturing exports and around 7% of South Africa's GDP, has, since the implementation of the Motor Industry Development Plan (MIDP) in 1995, grown production volumes, exports and investment, all of which have had a positive impact on employment in, and the economy of, South Africa.
"Ideally the needs of the automotive industry should be considered in isolation and a specific, industry-focused rail solution identified that will help the industry increase its global competitiveness and fully realise the benefits of the new APDP," says Everett.
The new APDP automotive industry programme - which replaces the current MIDP - offers, amongst others, moderated import tariffs, a local assembly allowance for production volumes above 50 000 units per annum, production incentives, rebates and investment allowances.
"While the new APDP is focused on growing local automotive supply and production by addressing the MIDPs major shortcomings, the automotive industry and Government need to jointly consider whether the objectives of the APDP can be successfully achieved if the global competitiveness of OEMs is compromised as a result of higher inland transportation costs."
Everett also believes that while the incentives offered by the APDP are welcomed, schemes such as the Automotive Incentive Allowance - which promises a return direct grant of 20-30% over a period of three years on investments in new plant and machinery - are likely to have limited attraction to OEMs unless issues, which directly affect their sustainability and ability to be globally competitive, are addressed.
In February this year, the South African Government's announced its intention to invest R200 billion in rail projects.
Everett believes "This is a clear indication that the South African Government realises the importance of rail in growing its manufacturing base and economy."
ends
Information as at June 2012
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