US auto giant Ford Motor Co. is to plow $1.05 billion into a plant in South Africa, a clear signal of the disdain for Nigeria and of the failure of its moribund auto policy.
This investment is Ford’s biggest-ever investment in the country — as the carmaker scales back in other regions including Brazil and Europe.
It contrasts starkly with the failure of Africa’s biggest economy to attract any meaningful investment into its auto industry.
Nigeria’s so called auto policy emphasised growing government revenues by simply raising tariff on imported vehicles and seeking to punish struggling Nigerians who have had no other option.
Industry experts and investors say what Nigeria needed to attract global auto giants was to create a working financing model that would ensure there were buyers for cars made in the country.
According to one economist, “Nigeria’s problem was never about price competitiveness and so it was not going to be solved by raising tariff. Nigerians are simply not in a position to afford enough units of locally built vehicles to attain scale and make any such investment viable.”
Ford’s upgrades to its South African plant near the capital, Pretoria, will boost the site’s annual capacity by almost a fifth to 200,000 units and create about 1,200 direct jobs, the company said in a statement on Tuesday.
The outlay will support production of a new Ranger pickup truck starting in 2022, both for domestic sales and exports.
The move comes after Ford said last month it will cease production in Brazil after a century of building cars there, closing three factories and cutting 5,000 workers.
The Dearborn, Michigan-based company has also eliminated thousands of positions in Europe as part of a sweeping $11 billion global reorganization, and culled about 1,400 salaried employees in the U.S. in 2020.
“This will help to expand and transform our country’s manufacturing base,” South African President Cyril Ramaphosa said in a speech at the Silverton site.
“The plan is “a clear statement of the company’s confidence in this development and its ambitions for its South African business.”
Ford’s investment is tied to prospects for the Ranger, one of the top threelight commercial vehicles sold in the country last year, Andrea Cavallaro, director of operations at the carmaker’s International Markets Group, said in an interview.
The country’s trade agreements and the government’s willingness to listen to infrastructure requirements also factored into the move, he said.
“The transformation here in South Africa is not just about the next model,” Cavallaro said. “We want it to be a huge hub for the export of this product — it is a global product and is hugely successful. It was an easy decision.”
Ford’s fresh investment and jobs will come as a welcome boost to South Africa, where almost a third of the workforce is unemployed.
The country has been hit hard by the coronavirus pandemic, with lockdowns and a resurgence of infections weighing on activity, and 2020 economic output probably contracted the most in at least nine decades.
Yet the auto industry has been one success story, with international carmakers including Toyota Motor Corp., Volkswagen AG and BMW AGoperating plants in the country.
The companies benefit from a manufacturing-incentive plan that runs through 2035, and Nissan Motor Co. and Daimler AG’s Mercedes-Benz are among those to have announced additional local investment in recent years.