Government’s Motor Industry Development Programme (MIDP) is what makes exports from South Africa competitive, says global Mercedes Car Group COO Rainer Schm�ckle.

DaimlerChrysler South Africa (DCSA) earlier this year started production of the new Mercedes C-Class for the local and US markets at its East London plant. Schm�ckle was the one who decided to award the contract to the South African plant in 2005.

As subsidiaries of Daimler around the world compete to manufacture and export Mercedes models, the MIDP is still “a necessary condition” for South Africa to clinch these types of contracts, Schm�ckle notes.

“The MIDP is necessary to offset the logistics disadvantage. South Africa has huge distances to cover [to and from markets].”

Schm�ckle says labour costs do not really offer any advantage, as labour is equally expensive in South Africa as in Eastern Europe.

The bottom line is that “South Africa needs the competitive help of the MIDP”.

Schm�ckle hints that it would be possible for Daimler to do more in South Africa, should the regulatory environment allow.

“The MIDP does not only contribute towards the viability of our local production. It also allows us to generate export opportunities for South African [component] suppliers.

“In 2007, component exports from South Africa into our German and US plants will be R4,3-billion, and will further increase in 2008.”

However, Schm�ckle says this requires a continuation of the “very positive regulatory environment with regard to exports and economic stability through sound fiscal policies and further investments in the country’s infrastructure”.

DCSA exports leather, catalytic converters, wheel rims, seat structures and engine parts to other Daimler plants worldwide.

Schm�ckle also highlights the benefits that securing the previous C-Class contract has brought to South Africa.

In 2006, DCSA paid the National Ports Authority a bill of R27,5-mil-lion. It paid taxes to the value of R900-million, spent R150-million on training and qualification expen- ses, and R22-million on social projects.

The good news offered by President Thabo Mbeki, following a long delay from the Department of Trade and Industry (Dti) in announc- ing the results of a review on the MIDP, is that something will be on the table by the end of the year.

Speaking at the official launch of the new C-Class at DCSA’s East London plant earlier this month, Mbeki said he is aware that the automotive industry is concerned “that we should complete this review as soon as possible”.

“Our government is completely at one with you in this regard.”

He noted that the Minister of Trade and Industry, Mandisi Mpahlwa, “has publicly indicated that we are determined to complete, by December, the process to outline a support programme for the industry to be implemented after the current MIDP expires in 2012”.

DCSA management board chairperson Dr Hansgeorg Niefer says he is “very confident that government is looking after the companies currently investing, or which have already invested” in the local automotive industry.

“The information we have from the dti is that the benefits under a new MIDP will be in a similar range as the old one. There is no reason to doubt that.”


Looking into the future, to about 2012, when it is likely Daimler will again have to decide where to manu-facture a new C-Class model, the East London plant will have to prove its mettle once more – and the list of competing plants may look somewhat different.

At the moment, the C-Class is being produced at two plants in Germany, and in East London. However, the C-Class will also be produced in China as from October or November this year, says Schm�ckle.

But he also says this plant will only supply the Chinese market.

“It will not make sense to produce in China for Western Europe. It is too far away.”

Schm�ckle believes there are a few things that may aid in making South Africa a more competitive choice, come decision time.

For one, he notes, the playing field changes substantially should the country concentrate on the transformation of its raw material resources locally.

“Then you don’t have to transport these raw materials over such huge distances.”

Another positive on the balance sheet will be if the potential market for the C-Class expands.

Schm�ckle says he would like to see the “dynamics and stability in South Africa broaden to the surrounding countries”

“South Africa has become an attractive market, but it can serve as a crystallisation point for the whole region. We would like to see steps in that direction – moving to more stability in the region.”

Niefer says DCSA will secure any future C-Class production contract by “placing ourselves in a position they cannot ignore”. “We believe we can export more cars to neighbouring countries by 2012.”
PUBLICATION: Engineering News
AUTHOR: Irma Venter
DATED: 21st September 2007