Confidence in African manufacturing growing, but is South Africa missing opportunities?

It is with mixed emotions that I report in this issue on two developments, one very positive for the south of Africa and the other equally positive for the north of Africa, in this issue. Let us look at the one that is relevant to all of us in South Africa first. In some ways they are linked because the companies involved thrive around precision German engineering and manufacturing.

The announcement that Mercedes-Benz Cars is to invest an additional R3 billion in the East London plant is great news for all of those that are involved with the plant. The announcement was made at the same event to celebrate the launch of production of the next generation C-Class. Since the previous investment announcement in 2018, R10 billion has been utilised for a wide modernisation of the East London plant. The plant upgrades include a new body shop, which has been designed for higher capacities and features more than 500 Internet of Things Industry 4.0-enabled robots. The investment and upgrades were made to the East London plant to increase volume outputs, optimise the assembly line and achieve commercial synergies.

About 650 000 units of the previous generation Mercedes-Benz C-Class were produced in East London during the seven-year lifecycle of this model, with the bulk of these cars exported to various global markets. That is 92 000 vehicles on average a year. So if you add the 40 000 vehicles that were being manufactured in the US and could be manufactured in East London (see, that is a 43% increase in production and one that could be very welcome.

However, it must be pointed out that there are some constraints to growth in East London, of which the principal one is infrastructure. Mercedes-Benz South Africa are involved in discussions about major upgrades and extensions to the harbour in East London but the other participant and the one in charge is Transnet. Need I say more.

The other announcement is about DMG MORI’s plan to build a new ‘Smart Factory’ production plant in Egypt. The highly automated and fully digitised production plant is destined to manufacture CNC turning and milling machines that presumably will be exported all over the world. The numbers they are talking about – 1 000 machines a year – surely could not be for Egypt’s consumption or even Africa’s consumption, from one supplier of CNC machine tools.

The automotive industry – where many CNC machines are used – sells approximately 200 000 vehicles annually in Egypt and is now the second-largest market in Africa (for reference one would think Nigeria is bigger but their number last year, yes year, was only 7 500 vehicles) and the 42nd largest in the world, with an annual production output of about 70 000 vehicles. It is reported that there are 12 automotive producers with assembly lines in Egypt and locally manufactured components only accounted for 17% of the final product. Egypt only ranks about 50th in world machine tool consumption so this is hardly enough to sustain a machine tool manufacturer.

But my question is this. Why could that new ‘Smart Factory’ production plant not be built in South Africa? There are many reasons that one could think of that would give Egypt an advantage over South Africa and there are many that you could assume but that would be speculating. Or is it that South Africa is no longer a preferred choice for Africa? The real reasons would be interesting to find out.