SOUTH Africa is the obvious country in which to base General Motors’ African operations, but urgent action is required on “red flags” in the business environment for the company to rectify its “miserable” export history.
That is the view of the president and MD of GM Africa, Mario Spangenberg, who addressed journalists in Johannesburg on Wednesday.
Mr Spangenberg, installed in the new continent-wide role in January, said the company had expanded exports across the continent for the Port Elizabeth-built Isuzu KB pick-up truck, but that “circumstances” facing manufacturers “needed addressing as a business community”.
He said the country “needs to provide an environment in which it is conducive to do business”.
Mr Spangenberg cited four areas where action was needed: a “stable labour environment”, “controllable costs”, competitive suppliers and a “focus on education”.
“South Africa used to have cheap electricity but has managed to successfully transform itself into the country with some of the most expensive electricity,” Mr Spangenberg said by way of example.
More should be done to “make the ports more competitive”, he added, saying that efficiencies needed to be found to “account for our geographic location”.
Mr Spangenberg said South Africa had done an “outstanding job” of integrating society since 1994, but “a focus on education is still lacking”.
He pointed to the programme to export the Chevrolet Spark from Port Elizabeth to Australia and New Zealand, which failed because of “cost issues”.
The car was built to cost parity with competitors at the factory gate, but the company “couldn’t bring the car to market” overseas because of ports and logistics costs, he said.
As a result, according to GM South Africa’s vice-president for planning, Ian Nicholls, the company was building about 7,000 Sparks a year as opposed to the 15,000 it had planned for and invested in. The company was now focusing on increasing the vehicle’s local market share.
At such low numbers it was hard to establish competitive local suppliers, and as a result the Spark has a local content of 20% and “there’s no value in a weak currency if you import all your components”.
“Being competitive is tough. It requires ongoing benchmarking and restructuring,” Mr Nicholls said.
Despite the challenges, the company’s Port Elizabeth head office was “the best location to grow from”.
“South Africa is the biggest African market and has the most integrated technology. The expertise is here and the government is oriented to the motor industry,” Mr Nicholls said.
Mr Spangenberg said “the only frontier for growth is Africa”.
“It’s going to grow. People are more educated and there is investment in transport,” he said, adding that GM’s growth in Africa last year was 17%.
The market for new vehicles in Africa would “hit 2-million units by 2016-17 and 2.5-3-million units in 10 years”. He said the firm would look to export “substantially more” than the 1,000 units it achieved last year, but he admitted that “our export history in SA has been miserable”.
Mr Spangenberg confirmed that production of the all-new truck had already begun, and exports to 46 African countries would begin later in the year.
In a separate statement on Wednesday, Mark Barnes, the car firm’s GM for international operations, described Mr Spangenberg as “a proven leader and an agent of change”.