Keynote address at the Corolla Export Ceremony of Toyota South Africa by Mr Jeff Radebe, MP, Minister of Transport, Durban

Programme Director
His Majesty, King Zwelithini
The Honourable Japanese Ambassador, Mr Akihiko Furuya
The Executive Mayor of Ethekwni, Obed Mlaba
Vice Chairman Toyota Japan, Mr Katsuhiro Nakagawa
President and CEO of Toyota SA, Dr van Zyl
Executive Vice President, Mr Shoji Baba
European Union Director Sales and Planning, Mr Jacques Pieraerts
National Union of Mineworkers of SA (NUMSA) representative, Mr Vusi Mkhungo
Distinguished guests
Members of the media
Ladies and gentlemen

First of all, I would like to express my gratitude to the Toyota SA for driving such a very significant initiative. As the 21st century unfolds, it is gratifying to note that the automobile industry's contribution to our economy is as strong, widespread and deeply rooted as ever. This is an era in which your industry has shown commitment to fostering an environment conducive to investment and world trade.

This event today demonstrates once again that the automotive industry is a cornerstone of a thriving economy in our country. And world over I'm sure Toyota South Africa is seen today as a significant manufacturing base for the African and European markets. I believe therefore that this occasion builds on this track record to help strengthen yet further our growth in the automotive sector. I don't need to tell this audience how important car manufacturing is. We all know that manufacturing matters not only to you, but to the government and the people of South Africa as a whole.

It is just over a century since automobiles were invented. Their impact on the world in terms of improving living standards and promoting economic growth is clear for all to see. It is probably true to say that, for most of the people even in this room, life without a car would be almost unimaginable. A strong automobile sector is therefore a vital and integral part of any economy.

Programme Director, today I just want to make a few remarks regarding the current situation surrounding the automotive industry in South Africa, but also to say one or two things about the opportunities and challenges that are ahead this dynamic sector. As you are well aware, the automotive industry is vital to our ability to compete in the future and a vital part of our wealth creation process in South Africa.

It accounts for about seven percent to South Africa's Gross Domestic Product (GDP) with almost R250 billion of output per year, with more than 320 thousand employees and millions of people depending directly on car manufacturing for their only livelihood. And this makes it one of the largest sectors in our economy after mining and financial services.

One of the great strengths of this industry is that it has a clear sense of how it fits into the South African economy. It is important to note that vehicle production is the second-biggest industry in South Africa's manufacturing sector, and one of the fastest growing.

While our economy grew at an average of five percent in the past years, vehicle exports now account for around nine fold since 1994, and now account for nearly seven percent of the country's exports. And this gives your industry a huge advantage in making the most of the opportunities available.

South African vehicle exports are projected to rise strongly this year and it is a well known fact that our domestic new vehicle sales increased by a record 22% in 2004, followed by a new record of 27% in 2005, making South Africa one of the best performing automobile markets internationally.

Between 1999 and 2005, the production of cars and commercial vehicles grew from 315 000 to almost half a million units, while exports more than doubled from approximately 60 000 to 140 000 units. Capital expenditure by this industry - investment production and export facilities and supporting infrastructure also more than doubled between 2000 and 2005, from around R1,5 billion to R3,6 billion.

This was coupled with further increases projected for 2006/08 together with massive job creation and investment opportunities. Ladies and gentlemen, the catalyst for automotive industry growth has been none other than our government's Motor Industry Development Programme (MIDP). This programme has boosted exports by enabling local auto manufacturers to include total export values as part of their local content total, then allowing them to import the same value of goods duty free.

This has allowed automakers to concentrate on manufacturing certain vehicles or components for export, while importing other models. I'm sure you are aware that our programme also grants a production-asset allowance to vehicle manufacturers that invest in new plants and equipment, giving them 20% of their capital expenditure back, in the form of import-duty credits over a period of 5 years. This automotive industry offers a number of competitive advantages to international concerns.

These advantages include a world beating cost ability on short or low volume runs, competitive tooling costs and a high degree of manufacturing flexibility. It also has good access to Southern Hemisphere and African markets, and offers right-hand-drive production facilities. This industry boasts several unique and state of the art technologies that are able to cope with the higher temperatures and dusty levels common within the African Continent.

Distinguished guests, I must also stress that the Automotive Industry Development and the Gerotec testing centres near Tshwane are world-class research, design, testing and training facilities comparable to any in the world. New investment opportunities are also being created for the industry by the introduction of free trade agreements with the European Union (EU) and the Southern African Development Community (SADC) as well as the United States (US) government's African Growth programme.

To date, I'm aware that there are more than 200 automotive component manufacturers in South Africa, and another 150 that supply this industry on a non-exclusive basis. Pressure on prices and the increased trend for suppliers to operate globally, has led to several mergers between component and original equipment manufacturers. These initiatives have produced the intended results, with locally made cars as well as components being exported in growing numbers.

Distinguished guests, today's event therefore signifies our ability to compete with the best in the world. This giant step to export passenger vehicles to African states and Europe as well as the upgrading of your production facility to 220 thousand units capacity signifies a crucial turning point in the automotive industry in our country. Export in the region of 147 000 vehicles to more than 40 destinations in Europe and African continent this year alone is phenomenal. It accounts for 60% of all vehicle exports from South Africa based on current export programmes. I am very happy to note that in 2007 Toyota SA's export sales totalled 59 378 or 34,7% of all vehicle exports from South Africa.

Quite frankly, Toyota SA has entrenched itself not only as the largest vehicle manufacturer on the African continent, but also the leading exporter of vehicles in South Africa. I am also glad to note that the impact of the Toyota SA 220K project is far-reaching and almost 50% of the total upgrade investment has been spent with local suppliers with established BEE credentials, resulting in the creation of 4 000 new job opportunities.

It is also important to note that Toyota SA has spent R300 million on training and development of its workforce over the past five years. This includes sending 174 people to Japan for training. This is an appropriate answer to the challenge of skilled labour shortage which continues to dampen growth prospects in the automotive industry with skilled artisans leaving the country. We need to ensure that our retention strategies are in place to keep our skilled workforce.

The rise of world environmental problems such as air pollution, global warming and the exhaustion of energy resources, demand of the automotive industry and all affected, to respond to this challenge. And we have indeed noticed that the automotive companies are placing maximum importance on tackling and overcoming environmental and energy-related issues. I am confident that your industry is making every effort to develop technology that will lead to cleaner, more fuel-efficient vehicles.

Programme Director, over the coming decades there will be global challenges as profound, if not more, than those brought about by the industrial revolution of the 18th and 19th centuries. And what took 200 years to evolve in that revolution could take a few years in the new global industrial revolution. Three decades ago 1,5 billion people lived in a market economy. Today it is more than six billion.

The global economy has doubled in size in the last 13 years. And the pace of change in the past decade has been unprecedented. It has brought economic expansion on an unprecedented scale. It is indeed a daunting prospect for us and other developing economies. So the crucial question for us is how do we respond? First, we must shape our response to globalisation. We have to make a case for breaking down trade barriers and realise that globalisation represents a real opportunity for us.

So the answer lies in investing in innovation, design and training to help our skilled workforces provide solutions for continued investment in our economy. I believe that South Africa is well placed to shape and influence economic developments in the next 20 years, South African businesses have a huge contribution to make. It is up to us, business, labour and government, to get out there and seize the opportunities in front of us. The 2010 Soccer World Cup is one such opportunity to be seized.

I hope that this initiative today makes our presence felt in the global market and that it will contribute to raising the competitiveness of our automotive industry in South Africa-because our economic growth demands no less. So let everyone in this room, who believes in the work of the automotive industry, set a challenge to turn the tide, and to build more support for our Economic growth and attract more direct investments. With these few words, I would like to thank you.

Issued by: Department of Transport
4 March 2008