Chinese automotive manufacturer First Automotive Works (FAW) today announced it would work closely with the Coega Development Corporation (CDC) to identify and attract potential suppliers from China and South Africa to locate near its new plant in the Coega Industrial Development Zone (IDZ).
The company hopes to send a strong message to potential Chinese and South African first and second tier suppliers that it means business in the Coega IDZ – and needs industry to support its investment.
This announcement comes as world leaders of emerging and developing economies meet today at the fifth Brics Summit in Durban, where representatives from Brazil, Russia, India, China and South Africa convene to discuss matters of political and entrepreneurial coordination, business opportunities, economy and other areas of cooperation.
FAW said this strategy was important to simplify logistics for the motor industry, particularly with the Ngqura and Port Elizabeth port facilities in close proximity to its manufacturing plant. FAW’s procurement strategy also forms part of its objective to grow local employment and to contribute to the growth of the economy of the Nelson Mandela Bay region.
“FAW, in its quest for excellence, will always strive to achieve the required production standards and suppliers to FAW need to adhere to this. Those located closer to our facilities will not only assist in driving logistics costs down, but closer proximity will make it easier to manage the supply chain – and provide the convenience of better servicing their supply commitment to FAW.
“In respect of the new FAW plant, traditional component suppliers could ‘shoe-horn’ advantages that this move could afford them,” said Louis Liu, FAW site and factory manager in Port Elizabeth. The limitation of distances from parts and supplier hubs to assembly plants can only have mutual advantages for all parties”.
FAW said although it had not yet formally identified the suppliers for this exercise it was hoping the Brics Summit and other profiling of its investment would lead suppliers to approaching it.
“The first choice is to utilize local suppliers but this will be dependent on reasonable costs and quality standards of their products. FAW still need to finalise the total requirement listing but will be looking for suppliers of components such as tyres, wheels, fuel tanks, batteries and production consumables,” added Liu. “Products to be procured include those used in daily operational requirements and to mention just one example, FAW will require gas and fuel for daily operational needs. Furthermore, FAW will try to localise procurement of some manufacturing equipment and tools used on the assembly line”.
Meanwhile the CDC has embraced a clustering strategy to give impetus to investment in the IDZ – and even cross-industrial opportunities exist with other investors in the IDZ, for example gas suppliers.
“It’s been proven that clustering assists business to perform better, achieve greater supply chain integration and higher levels of efficiency and productivity,” said Ayanda Vilakazi, CDC spokesperson. “Zone 2 is earmarked for massive automotive industry development and the FAW investment has ensured the presence of a major manufacturer which first, second and third tier suppliers can cluster around.”
The Coega IDZ is divided into specific zones earmarked for specific industrial clustering, with the automotive industry taking pride of place in Zone 2 and the Nelson Mandela Bay Logistics Park (NMBLP), a purpose-built area for provision of infrastructure and services to the automotive industry.
“Cutting edge innovation, the support of leading car manufacturers and investment by top tier automotive parts manufacturers, as part of a cluster strategy, is positioning the Coega IDZ and Logistics Park as the choice destination for automotive industry investment and production in the Eastern Cape and South Africa,” added Vilakazi.
In line with national priorities for skills development, the CDC has also put in place plans for a state-of-the-art tooling cluster also in Zone 2 to increase Nelson Mandela Bay’s competitive position by clustering tooling companies in a shared service environment.
“The CDC is involved in activities to continuously improve the competitive position of the IDZ and the NMBLP – and that of the region as an industry giant – and continues to deliver as an exceptional, competitive manufacturing location for the automotive sector in South Africa,” said Vilakazi.
The FAW truck plant is currently being built by WBHO Construction and is anticipated to be completed by the close of the 2013/2014 financial year. The first phase is expected to produce 5 000 trucks annually. The second phase will see production of an additional 30 000 light commercial and passenger vehicles annually.
