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Coega SEZ driving auto sector investment

Home Manufacturing & Processing Automotive Coega SEZ driving auto sector investment

By Mfundo Piti

THE Coega Special Economic Zone (SEZ) and the Nelson Mandela Bay Logistics Park (NMBLP) are regarded as an automotive investment destination of choice, helping to drive foreign direct investment, integrate local firms into the global value chains, promote export-orientated growth and generate employment.

Since inception in 1999, Coega has attracted 14 automotive companies ranging from new original equipment manufacturers (OEMs) to auto-component suppliers. More investment from the auto sector is expected in the future.

In line with Coega’s vision to be the leading catalyst for the championing of socio-economic development, the objective of the Coega Automotive Zone is to lead transformation and create a conducive “high-yielding business environment” for the automotive industry to choose Coega as their preferred destination in Africa.

The Coega SEZ is the leading SEZ on the continent. Therefore, new auto investors will join other companies that have already established a home there, such as Beijing headquartered BAIC, which invested over R3 billion in 2016 as part of Phase 1.

Other auto investors include FAW, with R600 million invested. It has reaffirmed its commitment to the local market, commemorating the 7 000th truck off its assembly line in Coega earlier this year.

The investments in the Coega Automotive Zone have generated more than 2,400 permanent operational jobs and private sector investment of more than R12,7 billion. The collaboration between the public and private sector has been instrumental in the success of the Coega Automotive Zone.

Road ahead

The NMBLP was established as a logistics and light industrial assembly park for the automotive industry, initially to support the requirement of Volkswagen South Africa (VWSA), and to increase the localisation content on their locally assembled vehicles by placing their first-tier suppliers adjacent to the plant.

The first phase of the park is currently populated with ten auto-component suppliers that have created nearly 2,050 operational jobs. The second phase will be developed incrementally to accommodate the expansion needs of the current tenants and placing of new tenants. This expansion will increase the footprint of the Coega Automotive Zone from 340ha to 499ha.

President Cyril Ramaphosa, in a recent speech to mark the start of production of hybrid cars at the Toyota factory in Durban, said South Africa identified increased production of electric vehicles (EVs) as one of three key priorities for climate action. Furthermore, the government has published a draft paper on a roadmap for increased production of fully electric vehicles, which will be presented to potential investors.

According to media reports, globally, there are about 10 million EVs on the roads. Of those only 1,509 are in South Africa, according to a global ranking by the Munich Mobility Show. But with the implementation of the new framework, South Africa could rapidly pivot towards the electrification of mass-market transportation.

The expected transition from Internal Combustion Engines (ICE) to new EVs brings about its own challenges from a component supply perspective. The EV power train has 60% fewer components than the power train of an ICE vehicle. Furthermore, considerations during the transition phase should be given to the up-skilling and re-skilling of the existing workforce in assembly methods of EVs, location of component suppliers and local content requirement in locally produced EVs.

Several reports indicate that South Africa is on track to become Africa’s biggest market for electric cars and a globally competitive electric car manufacturing hub, with battery manufacture a priority for the South African market, according to the Department of Trade, Industry, and Competition.

The Coega Automotive Zone is well positioned to support the market for electric cars and to locate local and international auto investors.

Mfundo Piti is the Coega Development Corporation’s Manager for Automotive and Economic Infrastructure Development.

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