The impact of South Africa’s infrastructure failings on major employers in the county has been highlighted in three recent developments.
Volkswagen’s global passenger car boss has warned that it might reconsider its South African manufacturing and export operations because of power cuts and other infrastructure problems, while mining giant Anglo American is considering job cuts for reasons that include rail and harbour constraints affecting iron ore exports.
And Astral, the country’s largest poultry producer, says it has spent between R2 billion and R3 billion in recent years to supply its own water and electricity – money that could have been spent creating jobs and improving the business.
Reuters reports that Volkswagen Passenger Car CEO Thomas Schäfer said its South African factory used to be among the manufacturer’s best performers globally.
Now, he said, the cost of mitigating challenges like load shedding, rising labour costs, and delays in railway transport and the movement of goods through South Africa’s ports had eaten away at the plant’s advantages.
“Eventually, you have to ask, ‘Why are we building cars in a less competitive factory somewhere far away from the real market where the consumption is?’” Schaefer said.
“I’m very worried about it … We’re not in the business of charity.”
The Anglo job cuts remain speculation, as the company has not confirmed that they will happen.
However, Moneyweb reported that the company had already discussed the issue with the government, and that Anglo had been asked to delay job cuts until after the general election expected in May next year.
The news outlet said Anglo already planned to slash corporate and head office jobs globally, with many of those positions in South Africa. Now it was also contending with falling platinum and palladium prices and declining iron ore sales “largely because of the poor performance of state ports and freight rail company, Transnet”.
Moneyweb said Transnet’s inability to rail commodities to ports has also led to coal companies Seriti Resources Holdings and Glencore Plc to start talks over job cuts.
The plunge in rail performance has seen the amount of iron ore transported to ports fall to the lowest in a decade, while coal shipments by rail are at a 30-year low, according to a report prepared for President Cyril Ramaphosa’s office.
As FairPlay has reported, South African poultry producers have had to spend billions of rand to supply their own electricity and water.
In an interview with the Sunday Times, Astral CEO Chris Schutte said the company had spent about R2.5 billion to R3 billion over the years duplicating infrastructure — electricity and water — to service the company, especially in Standerton, Mpumalanga, where its biggest processing plant is based.
“This money could have been spent on creating jobs and expanding the business to improve capacity and efficiency,” Schutte said.
Image: Volkswagen plant in Kariega. Courtesy of Volkswagen Group South Africa.
