A new African auto hub is being created in South Africaï¿½s Indian Ocean port city of Durban through a partnership between industry and government.
The area already has a strong auto industry. Africaï¿½s largest vehicle assembler, Toyota SA, is located in Durban, along with MAN Truck and Bus, a specialist medium and heavy commercial vehicle manufacturer. Toyota SA uses its Durban plant as a supplier of export vehicles and components to the east. In addition, there are about 60 component manufacturers located in the province, employing a total of about 15 000 people. Component manufacturers include Behr Engine Cooling, Dunlop Tyres International, Smiths Manufacturing, GUD Filters, Hesto Harnesses, Shurlok International and Federal Mogul.
The number is growing, according to city manager Michael Sutcliffe. ï¿½Constructive interaction between national government, local government and the automotive manufacturers has stimulated growth in the components manufacturing sector, addressing issues such as benchmarking, skills development and infrastructure,ï¿½ he says.
Sutcliffe believes that the cityï¿½s strategy of ï¿½acting in a coherent way that is of the highest international standardï¿½ helps investors in the auto and related sectors to benefit from logistics, marketing and supply synergies. ï¿½While we realise that they are often in tough competition with each other, there are areas where they can co-operate to mutual benefit,ï¿½ he says. According to Sutcliffe, the city decided to focus on the automotive sector because of the existing strength of the industry in the area and Durbanï¿½s investment in logistics. ï¿½Our second objective is to ensure downstream and upstream synergies with other industries. There is a whole set of other industries that support the automotive sector and are stimulated by it. These include Information Communications Technology and education. We are looking at smart technologies and also at ways of training up people for the auto industry.ï¿½
Innovation is one of the keys to the success of the auto industry in Africa, adds Sutcliff. ï¿½As a city, research and development is what sets you apart ï¿½ both technological research and researching the industry. You have to find out what makes certain things work better than others. Five years ago one would never have thought of the kind of research which began by getting competitors around the table. However, we have done it and we are now able to compare our industries with identical companies around the world in terms of work process, quality of goods, time to production, etc,ï¿½ he says.
One of Durbanï¿½s biggest attractions to investors is its manufacturing and logistics infrastructure.
ï¿½What we call the South Durban Basin is one of the biggest manufacturing hubs in Africa. We are also home to Africaï¿½s biggest port in terms of volumes of value of goods,ï¿½ he says. Durban is ï¿½ideally locatedï¿½ to access international shipping routes between east and west, he says. Excellent shipping links exist to the Americas, Europe, the Persian Gulf, south-east Asia, the Pacific Rim and Australia and New Zealand. The port is modern and well-equipped, offering a wide range of goods and passenger-handling facilities. These are backed up by specialised warehousing and materials-handling services, in addition to road, rail, air and pipeline transport systems. Durban has also established itself as an important transhipment hub. With South Africaï¿½s most important consumer market and important industrial nodes 500 kilometres inland around Johannesburg and Pretoria, road and rail links are well established to move goods through Durban between these areas and external markets. Air freight capacity out of Durban is also being given a boost with the development of a new international airport. The Dube TradePort will include a new international airport for passengers and freight, plus an industrial development zone with a customs exclusion area.
The strategy is working, according to Justin Barnes, chief facilitator of the Durban Automotive Cluster (DAC). He says the automotive industry is already a major contributor to the economy of the KwaZulu/Natal province in which Durban falls. Total output of the sector in the province is around US$2.5-billion. ï¿½Data from the South African Automotive Benchmarking Club (SAABC) shows sales and employment growth in KZN have been comparatively strong since 2000, with employment climbing by 24% to 2003; and sales by an even more impressive 43% on an inflation adjusted basis. The good news for the regional automotive industry is that further growth is expected over the next few years. Underpinned by the national governmentï¿½s Motor Industry Development Programme, which rewards exporters with import credits, Toyota SA is aggressively expanding its exports and should substantially increase output levels over the next three to four years. This has provided a strong impetus to the component manufacturers, resulting in increased capital expenditure. Once again, drawing from the SAABC database, evidence suggests that the KZN components industry is poised for future growth, with capital expenditure as a proportion of sales reaching over 6% in 2003,ï¿½ he says.
Not all suppliers are, however, linked to Toyota. ï¿½We have a number of suppliers who are here for strategic and business reasons, but who do not supply Toyota at all. Their customers are elsewhere in South Africa and around the world,ï¿½ he says.
According to Barnes, firms are rapidly acquiring the required accreditations and are upgrading their operations to meet international quality standards. ï¿½With direct financial support from the eThekwini Municipality as well as the 41 participating firms themselves, the DAC has interventions in place to bolster the performance of component manufacturers (particularly companies owned by previously disadvantaged people), optimise logistics chains and bolster human resource development.
Through the DAC and the regional chapter of the SAABC, the majority of the larger component manufacturers in the province participate in ongoing competitiveness benchmarks against their overseas competitors. According to Barnes, this data shows that the auto industry in the area is increasing its competitiveness.
The Durban Investment Promotion Agency is the official agency tasked with facilitating inward investment. Numerous incentives are offered to investors, either as part of the national package of incentives developed by the Department of Trade and Industry or local assistance in the form of rates concessions and infrastructure support.
Durbanï¿½s A,B,C,D strategy
A is for accelerating growth: ï¿½Weï¿½re looking to build the right platform for growth, bringing together the necessary agencies and departments to work together to create an investment-conducive environment,ï¿½ says Sutcliffe. It means major investments in infrastructure like roads and fibre optics, and finding ways to mobilise the best human resources for these sectors.ï¿½
B is for broadening the entrepreneurial base: Stimulating the small, medium-sized and micro-enterprises sector is important to strengthening the overall industrial and manufacturing base by increasing the number, quality and responsiveness of suppliers and service providers. ï¿½Weï¿½re working on producing employable people,ï¿½ says Sutcliffe.
C is for widening the competitive base: ï¿½The Apartheid economy created monopolies and inefficiency. By eliminating protection barriers and providing entrepreneurs with skills and support, we are stimulating a broader, more competitive economic base.ï¿½
D is for developing tourism: ï¿½Durban can become the biggest tourism centre in Sub-Saharan Africa. Ongoing investment in new attractions means that we are providing an African experience with world class facilities.ï¿½