When VW sneezes, Nelson Mandela Bay catches a cold

Volkswagen Group Africa’s (VWGA) 75th anniversary celebrations this year highlight how this one operation in Kariega anchors a socioeconomic ecosystem and has an impact that spreads far beyond the factory gate into the Nelson Mandela Bay economy and nationally.

 VWGA is the largest private employer in the Eastern Cape, and the company’s 3 600 employees represent not just a headcount of individuals but at least 3,600 families across Nelson Mandela Bay, with a salary bill of more than R4-billion annually. The company conservatively estimates that its more than 1,400 suppliers, a large portion of which are based in the Bay, together employ at least 50,000 people.

The economics are pretty obvious – those suppliers have suppliers of their own, all spending money in the local economy and contributing to the municipal coffers (the total contribution of large and medium-sized business in NMB to municipal rates and services income is about 40%, amounting to R6.7-billion in 2025).

Those 50,000 employees across the VWGA supply chain each spend money in local businesses, pay income tax and pay for municipal rates and services.

This is before considering the impact of the 161 VW dealers and their employees in cities and towns across the country.

Investment in the Kariega plant has amounted to more than R13-billion since 2011, with production suppliers in turn investing in their own plants to meet specifications of components supplied to VW.

These investments support local business opportunities and jobs in not only production suppliers, but across a broad spectrum of engineering, construction, IT, transport, security, professional services and more.

A critical aspect of these investments in plant upgrades, new models and new components is that they bring world-class manufacturing technology and advanced skills into the broader local manufacturing sector, a capability strength of South African industry in attracting new investors.

Building the VW Polo for all left- and right-hand-drive markets across the world, VWGA is the country’s largest vehicle exporter, last year exporting vehicles and components worth more than R36-billion and thereby contributing to national GDP and positive trade balance.

More than numbers

The numbers alone tell only part of the story, though. At VWGA’s 75th anniversary gala held in the Kariega plant, the most powerful story of local impact came from Lindithemba Sdeba, director for partnerships and linkages at Eastcape Midlands TVET College, who spoke on behalf of the local community.

Sadly, his speaking turn came after President Cyril Ramaphosa and other government representatives had already departed the event, because it was the message that politicians and the government most needed to hear.

Sdeba’s message conveyed the human story, the impact on a local community and its people, that can’t be told simply by numbers of jobs or numbers of cars built.

“If there was only one thing we could say to President Ramaphosa, it is simply this: When VW sneezes, we all catch the flu. That is our reality.

“What we see here is not just investment in building cars, but in early childhood education, youth centres, schools and businesses in our communities.

“When some of you hear about VW investing in the LEAP School (a maths and science-focused school in Kariega’s Kwanobuhle township opened as part of the anniversary celebrations) or their support for LoveLife (youth centre in Kwanobuhle), it is just another news story. But to this community, they shape our lived reality.”

Sdeba said that VWGA was “open to this community” and regularly met the local community and involved them in decision-making on the support needed, and that in turn the community strongly believed that they had a role in “protecting VW and making sure they get the support they need”.

Nelson Mandela Bay has lost about 6,000 manufacturing jobs over the past two years, with 900 jobs alone lost with the closure of the Goodyear plant in Kariega last year. Sdeba pointed to these closures and said that “if there is one thing we are not willing to lose, it is VW”.

“If there is one thing we are willing to protect as a community, it is this plant. It represents a safe space for generations, a beacon of hope when you look around at what is diminishing in Kariega. Without them, we lose ourselves and who we are.”

Sdeba highlighted the role played by VW’s bursaries for its employees’ children, providing education for artisans, teachers, social workers and others who contributed to the community.

However, he said, the community was “deeply anxious” at the suggestion that politicians and the government were “not listening to VW” and delivering the policy support and services needed to keep local manufacturing sustainable.

It’s not only about VW

The story of VWGA’s impact in Kariega is told to illustrate the deep impact that automotive manufacturing has on the South African economy; it’s not just about the numbers of a 22% share of national manufacturing output and 5% of GDP.

The example applies also to other automotive manufacturers, as the anchor of South African manufacturing.

Isuzu Motors SA and the Ford SA engine plant in the Bay may be smaller in terms of employment numbers but have similar local economic impacts, and this cluster of manufacturers amplifies the impact of VWGA through a shared network of suppliers, giving those suppliers the resilience that comes from having a diversified customer base and the ability to coordinate different technical, quality and delivery standards to global supply requirements.

The same applies to the role of Mercedes-Benz in the East London economy – employing about 2,400 people, paying salaries and municipal rates, and using local component and services suppliers in production of the Mercedes C-Class for the local and global markets.

The same again for South Africa’s other original equipment manufacturers and their local economic and supply chain impact – Toyota in eThekwini, and BMW and Ford in Gauteng.

The ripple effects of their impact cannot possibly be compared to that of a semi-knocked down vehicle assembler or a manufacturer purporting to be a completely knocked-down operation while importing the vast majority of its components.

While the billions of rands involved in an initial investment and the jobs created in a construction phase are welcomed, and they make great headlines, the question being missed is the number of jobs in actual operation and the use of local suppliers that widens the local economic benefits.

At the same time as VWGA contributes almost R200-million annually in municipal services, rates, taxes and license fees, the company had spent almost R1-million on repairing damage to its fleet caused by potholes in just five months, outgoing chair Martina Biene told the Nelson Mandela Bay Business Chamber’s annual general meeting at the end of May.

This is but one example of the impact of failing municipal service delivery on pushing up the costs of local manufacturing, hampering the ease of doing business and making South African manufacturers less competitive.

These problems have an impact far beyond a local headline. Canada’s largest daily newspaper, The Globe and Mail, recently reported on the threats facing VW in Kariega and the wider South African automotive manufacturing sector.

There is no arguing with the content of the article, but our politicians need to recognise that such coverage has a substantial impact on investor confidence in South Africa as an investment destination, which no number of investor summits and announcements can reverse.

There can be few in Nelson Mandela Bay who do not remember, or haven’t heard about, the shuttering of the then 62-year-old Ford South Africa plant and moving of the operations to Pretoria in 1985 (although the engine plant remained) and the devastating impact on the local economy and unemployment which rippled far beyond the company’s factory gates and took decades to recover. The common saying at that time was “last one out, switch off the lights”.