The new facility in the Eastern Cape’s Coega Industrial Development Zone is expected to produce between 40,000 and 50,000 cars a year, with capacity to double in a later second phase, The Brics Post reported.
This cars will be sold in South Africa and the rest of the continent.
Auto manufacturing is one of the fastest-growing industries in South Africa, and one of the bright spots in a slowing economy that some think is headed for recession.
South Africa’s government auto-incentive program has attracted companies including BMW AG, Ford Motor Co. and Toyota Motor Corp. to set up and invest in factories, Bloomberg reported. The industry has the potential to boost production by almost 50 percent to more than 900,000 vehicles a year by 2020, a local producers’ group said in May.
In 2014, Chinese vehicle maker First Automotive Works launched a $44.9 million truck assembly plant in the Coega development zone, which is expected to produce about 5,000 trucks and 30,000 passenger and light commercial vehicles a year, Brics Post reported.
The Chinese investment is one of the benefits of South Africa’s membership in the BRICS, President Jacob Zuma said at the time.
The new Chinese investment will bring much-needed jobs to South Africa, although “fears will inevitably be that the Chinese will bring their own laborers in to do much of the work as they have elsewhere in Africa,” Biz News reported:
These fears are largely unfounded, according to China scholar Deborah Brautigam. She estimates that the ratio works out to one Chinese for every five African workers, though this ratio varies between countries. While Africa is a relatively small trading partner to China – an estimated 5 percent of its global trade – South Africa is a favoured nation, says the Brookings Institute. Although South Africa is (China’s) largest trading partner in Africa, at a volume of more than US$20 billion, it represents only a fraction of Chinese trade with the E.U.
Earlier in 2016, Zuma launched a new vehicle assembly line at the Toyota factory in Durban, Brics Post reported.
Global automotive producers continue to have confidence in South Africa as an investment destination, and the supportive policy environment it offer, Zuma said.
The new Chinese investment was part of the Forum on China-Africa Cooperation held in Johannesburg in December 2015. Zuma and Chinese Prime Minister Xi Jinping signed 26 bilateral agreements valued at approximately $7.48 billion.
Despite the downturn in domestic auto sales, exporters anticipate an improvement in vehicle export sales during the second half of 2016, according to the National Association of Automobile Manufacturers of South Africa, Brics Post reported.
South African new vehicle sales peaked at 649, 296 units in 2013. This included 450,296 cars, 167,996 light commercial vehicles, 11,584 medium commercial vehicles and 19,340 heavy commercial vehicles. The largest sectors are intensely competitive with over 52 brands and 2,595 models in the new-car and light-commercial vehicle sectors.
China’s investment is welcome, said Matt Genrich, communications manager for Volkswagen South Africa, in a BRICS Post interview.
“The South African motor manufacturing industry requires more volumes to attract more suppliers to invest in South Africa from which we could also benefit,” he said.