Ford sounds alarm over South Africa’s investment challenges

By Bahle Gama

Ford has joined the growing list of automakers raising concerns over South Africa’s deteriorating business environment, warning that ongoing infrastructure inefficiencies could threaten the country’s position as a global manufacturing hub.

Ford Africa president Neale Hill expressed frustration over the state of South Africa’s transport and logistics systems, which he said are hampering local manufacturers’ ability to remain competitive. Speaking to Business Day, Hill pointed to inefficiencies at Transnet, stating that the country’s struggling rail and port networks were creating major challenges for vehicle exports.

According to Hill, South Africa remains overly dependent on road transport, with most vehicles still being moved by trucks rather than rail. He explained that manufacturers, including Ford, were forced to rely on Durban as a primary port, increasing congestion and costs. He noted that while load-shedding had become less frequent, logistics bottlenecks had emerged as a new crisis for manufacturers.

Hill highlighted that despite some improvements along the Gauteng-Durban rail corridor, Ford continued to truck vehicles via the N3 freeway due to unreliable rail services. He warned that South Africa’s rail freight costs, which should be a competitive advantage, were instead as high as road transport. In other countries, he said, rail transport was typically 30 per cent cheaper, making exports more cost-effective.

Ford’s Silverton plant produces between 640 and 660 Ranger units daily, with about 65 per cent destined for international markets. Hill cautioned that South Africa was competing with global plants for future production allocations, and the country’s logistical inefficiencies played a key role in investment decisions.

Ford is not alone in voicing these concerns. Volkswagen Group Africa chair and managing director Martina Biene has also warned that deteriorating business conditions were making it increasingly difficult for South African car manufacturers to remain competitive.

Speaking at a National Automobile Dealers’ Association (NADA) event, Biene criticised the government’s failure to provide stable infrastructure, stating that local manufacturers were forced to absorb additional costs. She revealed that Volkswagen had invested R130 million in backup power solutions at its Kariega facility to counter unreliable electricity supply, adding that running the generators cost the company R1.6 million per day.

Biene explained that these high operating costs were ultimately passed on to consumers, making locally manufactured vehicles more expensive. She warned that South Africa’s attractiveness as a manufacturing hub was at risk, as global automakers had other production facilities to consider. According to Biene, Volkswagen’s South African plant was competing against 117 other Volkswagen factories worldwide, and without improvements in infrastructure, future investments could be directed elsewhere.

Beyond power supply challenges, Biene echoed Ford’s concerns over inefficient transport and logistics, stating that unreliable rail and port operations increased manufacturing costs and caused costly delays. She added that an influx of cheap vehicle imports from Asia further worsened the situation, placing local manufacturers at a disadvantage.

Toyota South Africa Motors CEO Andrew Kirby has also raised alarm over the growing dominance of imported vehicles, particularly from China. He explained that while competition was welcome, the rapid increase in vehicle imports was accelerating de-industrialisation and hurting local production.

Kirby noted that South Africa’s traditional vehicle assembly model, known as Completely Knocked Down (CKD) production, had declined by more than 11 per cent since 2018. Instead, more cars were being imported as fully built units, a shift that reduced local job opportunities and investment in manufacturing. He linked this trend to South Africa’s Automotive Production Development Programme (APDP), particularly Chapter 98, which he said made importing vehicles more attractive than assembling them locally.

Kirby emphasised that for South Africa’s automotive industry to thrive, the country needed to prioritise CKD production and increase the use of locally made parts. He urged policymakers to address infrastructure challenges and review trade policies to ensure that domestic manufacturers remained competitive.

With South Africa’s automotive sector contributing around 5 per cent to the country’s GDP, industry leaders have warned that continued inefficiencies could see future investments being diverted to other markets. As the government seeks to attract foreign direct investment, manufacturers are calling for urgent reforms to ensure that South Africa remains a competitive vehicle production hub.