Address by Deputy President Kgalema Motlanthe at the opening of the new Volkswagen of South Africa (VWSA) Parts and Accessories Distribution Centre
17 Jun 2010
Chairman of the Board of Management-VWAG, Dr Martin Winterkorn
Chairman of the VWSA Board, Dr Jochem Heizmann
Managing Director of VWSA, Mr David Powels and the entire Board
Members of the Media
Ladies and gentlemen,
I am pleased to be part of the celebration of the opening of the new Distribution Centre for VWSA. I believe this is part of VW’s commitment to the creation of a world class plant with modern infrastructure, technology and processes in South Africa. This is happening at a time when we have just emerged from a biting global economic recession.
South Africa has not been immune to the recent global economic crisis that resulted in a global collapse in demand and lower production volumes leading to massive job-losses in the automotive industry, to the extent that it threatened the existence of some of the major international automotive producers. These challenges faced by the industry led to some sceptics questioning the continued viability of the automotive industry in South Africa.
It is therefore very pleasing that today we witness the opening of the Distribution Centre that is part of a total investment of R4 billion made by VWSA in the last three years. In congratulating VWSA for the investments made in the last few years resulting in the launch of the new Polo and Polo Vivo, I wish to point out that the progress achieved in localisation is very encouraging. I am told that local content levels of these new vehicle models have moved from about 38% to over 70%.
Driven by the concern to make some movement in the pivotal economic sphere of industrialisation, government has come up with what should be a results-orientated strategy, the Industrial Policy Action Plan 2 (IPAP).
The Industrial Policy Action Plan seeks to respond to various economic and industrial policy imperatives, as well as to address a weakness that existed in the South African economy.
Part of our vision of the Industrial Policy Action Plan is to have an industrialisation trajectory that is responsive to:
• The intensification of South Africa’s industrialisation process and movement towards a knowledge economy.
• The provision by domestic manufacturers of the capital goods that our growing economy needs and will continue to demand.
• The promotion of more labour-absorbing industrial sectors, with an emphasis on tradable labour-absorbing goods and services and economic linkages that catalyse employment creation.
• The promotion of a broader based industrialisation path that is characterised by greater levels of participation of historically disadvantaged people and marginalised regions in the mainstream of the industrial economy.
The 2010/11 to 2012/13 Industrial Policy Action Plan is based on four key pillars, namely:
• We intend developing proposals for enhancement of access to concessional industrial financing for investment in IPAP priorities and other productive sectors.
• Second, government will revise procurement legislation, regulations and practices to enable the designation of large, strategic and repeat or ‘fleet’ procurements in a range of sectors.
This will aim to sequentially increase competitive local procurement and supplier development opportunities, minimise ‘leakages’ from the domestic economy and support meaningful Broad Based Black Economic Empowerment (B-BBEE) in all three spheres of government and in state owned enterprises (SOEs).
• Third, government will deploy its trade policies more strategically. This includes intensifying the campaign led by South African Revenue Service (SARS) against practices such as customs fraud, under-invoicing, smuggling and illegal imports - all of which profoundly undermine productive capacity and employment in the economy.
• Fourth, government will target anti-competitive practices, particularly where these concern intermediate inputs to downstream labour absorbing production as well as consumer goods to low income households. This will apply to, among others, products such as carbon and stainless steel.
The Automotive Industrial sector faces numerous challenges stemming from the past, which, despite good ongoing efforts, still need to be surfaced as shared concerns in the overall development of our country. I am saying this aware that the motor and automotive sectors are the most important in the manufacturing environment as they contribute more than a quarter of the manufacturing gross domestic product (GDP).
Industries of this magnitude should therefore lead the charge in the dynamic process towards meaningful economic transformation which at the moment finds expression in government’s policy of broad-based BEE. On this account, it was therefore concerning to note the results of the comprehensive study by the Corporate Strategy and Industrial Development (CSID) Research Unit based at the University of the Witwatersrand, whose findings paint a less than rosy picture of BBBEE in the metals and engineering as well as automotive industry.
Among others, the study showed that less than 1% of the businesses in these industries are black-owned. The study also shows a disturbing trend in terms of the demographics of the industry, in both the board membership responsible for critical decision making and the management levels.
So in terms of both race and gender index, much still needs to be done to ensure a more or less representative industry better equipped to respond to global imperatives by leveraging the abundant human resources we have as a country.
This situation, ladies and gentlemen, is further compounded by the study’s findings in the all-important area of skills development and training. In this regard, it is reported that not enough is being spent on training workers in critical or core skills. The training offered focused mostly on occupational health and safety, which, important as it is, does not address the core needs of our economy.
Further, it also found no link between training initiatives and the translation of these into a change in the structure of employment equity, such that training holds out the prospect of upward job mobility. The other area that needs attention in terms of transformation is procurement to black-owned enterprises.
We need to begin thinking outside the box, so that more opportunities are created for black-owned enterprises to supply technical or core services or inputs to these companies. Yet, in spite of these challenges, I am confident that, working together as stakeholders the automotive industry can overcome these challenges, especially economic transformation in the metals, engineering and automotive sectors.
One also notes that among the major concerns expressed by unions in the industry is the issue of consultation and cooperation. Being disinclined to engage in discussions with broad stakeholders, including labour, limits the possibilities for progress going forward. In a way, both labour and captains of industry are joined at the hips, such that if one is disposed to move forward and the other stalls, neither stands to gain in the ensuing struggle.
Thus, it may be necessary to revisit the approach adopted with respect to charter discussion processes in both metal and automotive industry, a process which would be profitable if it is an all-inclusive exercise.
For all the challenges outlined above, we are proud to have VWSA as one of our leading corporate citizens, and will continue as we have, to work with you and our labour partners as we again together and in partnership, continue to respond to the challenges.
The evidence of working together over the past few years shows that together we are fully committed to the future growth and development of the South African vehicle and associated industries, including developing worker skills and improving supply base capabilities, which in turn supports our black economic empowerment objectives.
This event is occurring amidst conducive marketing conditions given the current global spectre of FIFA World Cup in the country. We also hope that this partnership will find expression on the soccer field as both Germany and South African progress towards the finals.
I wish all of you every success in growing Volkswagen of South Africa from strength to strength.
Issued by: The Presidency
17 June 2010
Source: The Presidency (http://www.thepresidency.gov.za)
Issued by: The Presidency
17 Jun 2010
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