Plans to expand the port of East London would benefit not only Mercedes-Benz SA (MBSA) and its dockside vehicle assembly plant but also provide an alternative outlet for other motor companies fed up with the shortcomings of Durban harbour — the local motor industry’s main import-export hub.
This is according to MBSA joint-CEO Andreas Brand, who said that after years of what even Transnet admits has been “very sluggish” investment, the state transport operator says it is ready to upgrade the Eastern Cape port.
Plans include doubling dockside space so two ships can berth at once. That could attract business from Gauteng-based vehicle and components companies frustrated by Durban’s inefficiency.
In the past, companies such as BMW, Ford and Nissan have explored Gqeberha, Coega and even Maputo in Mozambique as alternatives. There is also talk of refurbishing the freight rail line between Gqeberha and East London. The latter is not a deepwater port, so big ships have to stop at Coega to transfer their East London cargoes to smaller vessels.
Brand, speaking at an MBSA-hosted event in East London last week, said a direct rail service would make the system more efficient.
Buffalo City mayor Princess Faku said: “The city has been too focused on automotive investment. We have not diversified enough.”
It is estimated that MBSA and its suppliers, based mostly in the local industrial development zone (IDZ), contribute about 25% to East London’s economy.
MBSA has built vehicles in SA for 65 years. The German parent company invested more than R13bn to build the current C-Class car range in East London. More than 90% of production is exported to 80 countries around the world. One of the most important is the US, where MBSA benefits from duty-free market access through the African Growth and Opportunity Act (Agoa).
That access is now under threat because of SA’s relationship with Russia. Brand admits losing it would be “significant”, requiring MBSA to be allocated new markets to make up the demand shortfall.
“SA is perceived as not being a good partner of the US,” Brand said.
Whether that is true is irrelevant. When it comes to international trade and investment, “perception is reality”, he said.
“We have to be very careful about how we are seen. Fair or not, it has a big influence on decision-making.”
‘New export markets’
Economist Thai Leoka, founder and MD of Naha Consulting, said: “Were it not for Agoa, the motor industry would not have developed as it has. But I don’t believe we will remain in Agoa for perpetuity. We have to find new export markets.
“SA’s negative perception is heightened by shortages of electricity and water. However hard companies try to reduce their dependence on Eskom, load-shedding hurts.
“An economy can’t grow without electricity,” Leoka said.
In the Eastern Cape, most current water shortages are caused by a mixture of drought and poor infrastructure maintenance. “We are approaching the point when no water will come out of the taps,” Brand said.
MBSA was looking for ways to create its own water supply. Even when there is water, he added, the quality is sometimes too poor for vehicle manufacture, particularly in the hypersensitive painting process.
MBSA is an important cog in the global group’s manufacturing network and has won several international awards for the quality of its cars. IDZ CEO Simphiwe Kondlo said East London should try harder to use the company’s presence as a carrot for more investment.
“We need to capitalise on the depth of skill and experience involved in building very complex products,” he said.
“We need to diversify our economy on the back of a very successful motor industry. It’s a skills- and technology-intensive industry that can be a spin-off into other industries.”
Lekoa, however, warned that potential investors expected to see electricity and water issues solved first.
“They don’t want to be an electricity producer or a water provider. They want to find these variables already here so they can plug straight into the system.”
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