The Eastern Cape’s economic hub is facing an existential crisis, and the November local government election will be make or break. That’s the view of Denise van Huyssteen, CEO of the Nelson Mandela Bay Chamber of Business.
“We need a stable, competitive, professional local government,” she tells the FM.
Instead, the metro has had 19 city managers in six years; it once appointed an MMC for infrastructure & engineering who had been convicted of assault for hitting a councillor on the head with a glass jar.
In short, it’s been a model of instability, dysfunction and chaos, which Van Huyssteen believes may explain why Nelson Mandela Bay (NMB) has been in existential crisis mode since at least 2020.
Business and civil society have collaborated to hold the line against water, electricity, rail, port and crime crises, which have deterred investment and tested the region’s survivability.
“Worsening municipal infrastructure failures, governance instability, policy delays, cheap imports and rising power costs are undermining investor confidence and threatening the sustainability of the metro’s manufacturing base,” says Van Huyssteen.
Almost a quarter of NMB’s economy is dependent on manufacturing, mostly automobile manufacturing. Many of the manufacturers, and all the big auto manufacturers, are multinationals living on borrowed time as their overseas principals weigh the chances of remaining internationally competitive in what Van Huyssteen describes, with studied understatement, as “a very challenging environment”.
In fact, as is well documented in the latest auditor-general’s report, the local environment has been “disastrous” in terms of water, electricity and road infrastructure, she says.
“When you have multinationals investing in your environment, you really need the basics to work. To stop head offices in Japan and Germany from relocating their plants, it’s crucial to have stability from a political and municipal perspective.”
She agrees with outgoing Volkswagen Group Africa boss Martina Biene, who says political choices made now will be key to the auto manufacturing sector’s future in NMB.
Van Huyssteen says: “The election in November is probably the most critical election post-1994 — especially for a metro like NMB, whose future trajectory will be determined by the outcome. If we have stability, there’s more chance of rebuilding, which would help restore confidence. Obviously, if we don’t have stability, it would have the opposite impact.”
She believes there’s a “very high” risk of head offices pulling their auto manufacturers out of South Africa, given the challenges facing them in addition to local infrastructure, service delivery and governance failures.
“You have global challenges of overcapacity and national challenges where we’ve been far too slow to implement the necessary automotive policy changes to protect completely knocked-down assembly companies like Volkswagen, Toyota and Ford.”
A high percentage of what they do to their vehicles is localised and has a downstream impact on components manufacturers and a whole support system around that which affects “literally every level” of the economy.
“You also have so-called manufacturers coming into the local market and doing semi-knocked-down assembly, where vehicles are imported in kit form and put together at a local plant.”
That is often “misrepresented” as local manufacturing and adds relatively little to the local economy, Van Huyssteen says. “It’s important that people understand the difference between the two. We need stability, we need policy certainty and we need an equal playing field if we want to save manufacturing.”
She adds: “Our economy is centred on manufacturing.”
Saving auto manufacturing
The question is whether NMB would be viable without its auto manufacturers and the ecosystem around them.
“No, they’re critical to our economy. So it’s vital that we move with speed and urgency. While we need action from various role-players, we also need diversification of our manufacturing economy.”
Will this be enough to fill the hole when auto manufacturers leave and their local suppliers close down, as is happening in the components supply sector, which directly employs 80,000 people?
“That’s why we have to move with speed and push wherever we can to save auto manufacturing. We need to see much more urgency — whether you’re talking about port and rail inefficiencies or local government instability.”
Van Huyssteen used to work at General Motors in Port Elizabeth, which divested from South Africa in 2017, so she’s been down the auto industry divestment road and recognises the signposts.
“We understand how international investors take decisions and how global supply chains work. Which is why we’ve been pushing so hard for policy changes and for the basics on the ground to be supportive of manufacturing.
“For me, the tragedy is that we are manufacturing according to global standards. People are often surprised when they come from [developed] countries and see the level of innovation and ability we have here. That is something we must fight to keep. But if we don’t do the things that are needed, we are going to lose that.”
Have things been left too late? How competitive can NMB’s auto manufacturers be with a country like Morocco, never mind China and India?
“Obviously places like Morocco are moving ahead of us because they have a much more investor-friendly environment. From a policy perspective, their governments make it more attractive for manufacturers to be there.
“You also see that a lot of the ports on the continent have overtaken ours. South Africa has lost a lot of ground over the past few years. We need to recover that quickly if we want to continue producing cars.”
Election watch
Signalling to international investors who will be watching the election closely that NMB is at least moving in the right direction will be vital, she says.
“We need confidence to be rebuilt. For this you need political and municipal stability. When you achieve that, you’ll get economic stability and an environment in which investors can make confident investment decisions. So this election is the most critical since the advent of democracy. We don’t care which political party governs in the metro. We need good governance, integrity and transparency.”
The fact that Andile Lungisa, who served two months of a two-year sentence after hitting a DA councillor on the head with a glass jar, has been shortlisted as the ANC’s mayoral candidate won’t be giving investors looking for assurances of future stability much confidence, she says.
“We need a stable coalition that focuses on rebuilding the metro. If investor confidence is there, we’ve got technical expertise and other support we can provide so we can very quickly begin turning things around.”
Without this and the support of business working with civil society, unions and NGOs, it’s not going to happen, she says. “That’s the reality.” Without the active, hands-on support of business across the board, the metro would have collapsed.
But how much longer can business keep doing the job of government? At what point does it start holding the metro government to account?
“We’re doing a lot of advocacy and lobbying. We need a vibrant civil society to be part of the accountability process to move the municipality forward,” says Van Huyssteen.
“I don’t think legal action will change anything. Local government reforms are key and need to be expedited. Business can only do so much. But we need to survive, and holding the line is the best option we have right now. I think the unions and business and civil society are on the same page. We understand it’s about the survival of NMB. Of jobs, of the economy.”
Her biggest fear is “that we end up with municipal dysfunction that continues on the path it is on, and no auto manufacturing sector. We need to stop that now and rebuild. Otherwise we’re looking at an accelerating decline, and manufacturing would be the most vulnerable.”
Core to that is the auto manufacturing sector. Its depletion would be a disaster for NMB’s economy.
“We already have an official unemployment rate of 33.4% in NMB, which is unacceptable.” The real rate, she says, is more than 40%.
“That’s why this local government election is so critical. If the situation doesn’t change, it will have a drastic impact on investor confidence. That’s the bottom line.”
