Ford’s Sub Saharan chief Jeff Nemeth joined Alec Hogg on CNBC Africa’s Power Lunch – and provided a list of economic reforms that would get the multinational motor manufacturer pouring billions more into SA. Â Â
In the South African context, how big is Ford? Ford has 65 plants around the world and 171,000 employees. Where does South Africa stack up?
Well, we have two of those 71 plants.
Seventy-one now. It was 65 on your website.
Some are under construction. I’ve already added them. We have two under construction in India and two under construction in China. I think the total is between 65 and 70.
So it’s small, in a global context.
Yes, we’re small in a global context. We have an engine plant and an assembly plant. We have about 3500 employees in South Africa.
Why are you here?
We’re here because it’s a good market. We’re number three in the South African market, behind VW and Toyota. We’ve been here for 91 years now.  We were the first vehicle manufacturer in South Africa. One of the first Model T’s came to South Africa in 1904. Ford was incorporated in 1903 so we have a long, proud history in South Africa and we want to keep that up.
The one sector of the economy that Government is trying to support and protect as much as possible, is motor manufacturing. Are they doing enough?
Motor manufacturing spins off a lot of adjacencies. We have a whole supply base. I have two plants. There are 62 supplier plants supporting my two plants. With that comes infrastructure, schools, hospitals, roads, and power development.
How many people are employed as a knock-on effect of your plants, how many people are employed by your suppliers, what is the multiplier effect?
Generally, the multiplier is between seven and ten, which is used globally in the automotive industry, so it’s likely somewhere in the neighbourhood of 18 to 20,000. We don’t count them that way because many of our suppliers supply other OEM’s as well, especially the ones that we have in Rosslyn, which would supply Nissan and BMW as well.
But it’s a good chunk of people.
It’s a good chunk of people and they have good jobs.
The question though, is what about the rest of the continent? If Africa is going to fulfil its potential, are you supplying it from here or from elsewhere?
In 2010 you can remember the situation with the automotive industry and all of the bailouts/discussions, so capital was very dear at that time. We were deciding whether we should invest R3.4bn in our South African operations to produce the new Ranger. Really, the decision hinged on the strategic nature of Africa and how we needed a manufacturing footprint to supply Africa. That’s really, what carried the day for the plant here in Pretoria. We are exporting two-thirds of what we make. When you think about the current account deficit in South Africa, and what it’s doing to the Rand and some of the other unfortunate consequences of a negative current account balance, we really helped to defray that a bit with the two-thirds that we do export to Sub-Saharan Africa as well as to Europe.
Are you selling everything you can make?
Yes, we are at full speed.
So what comes next?  Further investment or a requirement that some of the underlying restructuring in the economy, happens?
Well, we’re always looking at how to serve our customers better. Of course, we see six to seven percent GDP growth on the continent.  The European region is starting to recover and we’re seeing increased demand there. We have some more capacity that we can bring on stream here with shift patterns and maybe, some investment in line speed so we’re looking at all of that right now. We have nothing to announce at this time, but those are all, very active discussions.
You haven’t really answered my question though, which is, ‘are you comfortable here or sufficiently comfortable with the structure of the economy’ because many aren’t. Would you be prepared to invest more, to fulfil the demand on the African continent? Alternatively, being a multinational you could supply from elsewhere.
I can tell you what the decision factors are, on which we’re working. We’re working on understanding power supply. We’re working on a more stable labour environment, together with the Government and the unions. We’re working on increasing our efficiency and productivity in our plants because we still have room to go before we’re globally competitive. If we can demonstrate, together with our partners, that there’s a favourable outlook for those three variables, then the decision to invest more in South Africa becomes easier to make.
How does that decision come about? Do you go off to the U.S., sit around the table with your colleagues in America, and say ‘I think you should be putting more money into South Africa for these reasons and by the way, here’s the outcomes of what we’ve looked at’, or are other issues shaping that decision?
Firstly, I was just in America in January, coincidentally, discussing these issues. What the management team in Detroit and Dearborn wanted to know was about those issues. What’s the power outlook? Tell me about Medupi and Kusile. What’s really going on? Is it what I read in the news or are there others on the ground? What about NUMSA and the breakoff from COSATU? What’s that likely to do in the future? What are the geopolitical issues that surround not only South Africa, but some of the African countries that we’re supplying, as well? There’s a constant dialogue.
What did you tell them?
I told them that there were very favourable movements in the labour effort that Cyril Ramaphosa is leading with the labour Indaba they had in November. There’s a renewed dialogue in labour and that was encouraging, but it’s still too early to tell because no agreements have been penned and at this point, we’re still just finding a common ground.
How?
On power, I told them it’s going to continue to be an issue. You can’t build a power plant overnight and the encouraging thing is that Eskom has already started talking about the potential of privatising. If that happens, then there’ll be potential investment coming into South Africa in addition to what comes out of the national fiscus.
Geopolitics?
Geopolitics: I try to stay away from too much politics.
What I’m hearing from you Jeff, is let’s get our labour sorted out. Let’s get the private sector into the power sector. Dearborn/Ford Global would then look favourably, on your request to supply a 6 – 7 percent growth in the African continent.
Exactly. That’s a good way to sum it up. What’s really encouraging as well is the success of the product that we build here. It’s just continued to grow year-over-year. We built 75,000 last year, which was up from 65,000 the year before and we’re looking at – again – somewhere between 10,000 and 15,000 increase this year. The product is therefore continuing to drive our success as well. When you have a good product and a good process to deliver that product, it’s a recipe for success.
Imagine Jeff sitting around a table with his colleagues in the United States, having to argue that there is an optimistic side to the Eskom story and that there is an optimistic side to the labour story. Let’s hope that there are people who can make a difference on those fronts, listening and listening closely because this country is open for business. Sometimes, we just don’t send the right agendas to the places we need to.
