DaimlerChrysler in South Africa

“We wouldn’t be here if it didn’t make business sense,” says Dr Hansgeorg Niefer, the newly-appointed chairman of the managing board of DaimlerChrysler South Africa (DCSA). The company, which has been in South Africa as Mercedes Benz since 1954, sees further growth opportunities for both itself and component suppliers.

This follows the awarding of a contract to assemble the next generation C-Class Mercedes-Benz ‘ the W204 ‘ in DCSA�s plant in the Eastern Cape city of East London. At present, some 200 Mercedes-Benz C-Class vehicles and 40 Mitsubishi Colts leave the plant daily and go straight to the East London harbor or directly into the local market.
Niefer spoke to Ed Richardson of Automotive Industries (AI):

AI: What are the advantages of being in South Africa?

Niefer: We have a long history of success in South Africa and we are not the kind of company that jumps in and out at short notice. The biggest advantage is affordable labor costs. The second is flexibility. Compared to Europe our manufacturing is much more flexible and we can quickly change models on the production line if there are any problems. This is due to the balance between automation and labor. People can adapt more easily than machines. We also like to employ people in order to create jobs in South Africa.

In addition, the current market in South Africa is good and there are opportunities in neighboring countries. We are also here because of the government’s Motor Industry Development Plan (MIDP), which is a win-win solution for both OEMs and the country. (The MIDP allows importers of fully built up passenger cars to earn credits to offset import duties through exports of vehicles and components.)

AI: Given the long logistics lines between South Africa and the other main automotive hubs in the world, it is obviously in your company’s interest to have more component suppliers close to you. What are you doing to attract them?

We are constantly talking to suppliers in Germany and US. There are clear indications that it is not only European companies, but also US firms that are seeing major business opportunities. In 1996, the Africa Association (Afrika-Verein), the Federation of German Industry (BDI) and the Association of German Chambers of Industry and Commerce (DIHT) came up with an initiative aimed at attracting German investors to Southern Africa and developing relations between the two regions. The result is SAFRI, the Southern African Initiative for German Business, and it collaborates with fourteen member nations joined together as the Southern African Development Community (SADC).

Together, they make up a partnership with significant growth potential. SAFRI�s most important undertaking to date has been the Human Resources Development Project,
which started in 1998 and is financed by DaimlerChrysler via the SAFRI Chairman’s office.

The project offers workshops entitled “Excellence – The Key To Competitiveness” and so far more than 300 African entrepreneurs from small and mid-sized enterprises have been trained in key aspects of business expertise.
We also realize that if we want to attract more suppliers, we are going to have to focus more on technology. Labor-intensive work is increasingly moving to India and China, and we have to focus more on technology-driven tasks which cannot be moved to other manufacturing destination as easily.

One of the interesting initiatives has been to bring a group of US minority business enterprises to South Africa and to introduce them to the African entrepreneurs. After meetings with 50 South African Black Economic Empowerment companies, the US businesses left seeing South Africa as a country where they can invest with technology transfers. Three companies out of the 15 that visited are busy with negotiations.

AI: How important are exports from South Africa?
Niefer: The reality is that the South African market is quite small. Manufacturers need to export vehicles and components, otherwise manufacturing is not viable. We realize that our own volumes are relatively small, so we try to find a supplier of parts that are used in more than one model. They then supply for local production and export. We encourage exports because we earn MIDP credits on them. Examples are alloy rims, catalytic converters and seat covers.

AI: The Eastern Cape province in which the DCSA plant is situated has a strong agricultural economy. Is it a source of natural fibers?

Homegrown sisal fiber rather than coconut fiber is used in the production of our full range of vehicles for the domestic and export markets. We imported the natural fiber expertise from the Amazon project to East London and, working with a research group from the Council for Scientific and Industrial Research (CSIR), DaimlerChrysler has established an entire supply chain for sisal, from the farm right through to the production line. Sisal has proved to be durable, versatile and easy to dispose of in an environmentally acceptable manner, and it is proving popular in a wide variety of industrial applications around the world. In October 2001, the first natural fiber-reinforced component was included in Mercedes-Benz C-Class vehicles. Since then, local sisal producers have expanded dramatically and they now supply other industries in the area. Massive job creation has resulted and sisal farms, employing a few hundred rural women each, have been established in the Eastern Cape and in the Northern Province.

AI: Given South Africa’s geographic position thousands of miles from the major markets, logistics are a special challenge. What support do you get from the port authorities.

Niefer: DaimlerChrysler is ideally situated, with direct access to the harbor. East London has the advantage of not being congested, which means that vehicles and containers move quickly. We are really happy with the port of East London. They are really committed and focused on us.