THE announcement on Tuesday that the Industrial Development Corporation had succeeded in attracting a Chinese minibus taxi assembly operation to the country was presented by Economic Development Minister Ebrahim Patel as a "concrete step in the move to reindustrialise South Africa".
However, as Econometrix chief economist Azar Jammine said on Wednesday, the R192m investment is "absolutely tiny" in the world of automotive production and assembly.
Beijing Automobile Works South Africa (BAW South Africa) said it would be assembling the BAW minibus known locally as the Inyathi, and would step up from semi-knockdown assembly to complete knockdown should the volumes look good enough, a change that would require a further R2bn investment. And in that rider lies the potential problem.
BAW South Africa’s head of sales and marketing John Jessup told Business Day on Tuesday that the plant would eventually have a capacity to assemble 9,600 vehicles a year.
The problem is that the size of the South African market for minibus taxis hovers at around the 20,000–22,000 mark. The most optimistic predictions reckon the market could rise to 28,000 vehicles per annum in 2015.
As things stand, it is not only BAW South Africa that has an eye on this slice of the automotive pie in South Africa. Toyota Motors South Africa, the market leader by far with their Durban-manufactured Ses’fikile and Quantum products, has the capacity to produce 20,000 units a year, and now produces about 12,000 a year.
Nissan South Africa will also be introducing a minibus taxi assembly operation "at the end of next year", spokeswoman Veralda Schmidt said on Wednesday, although she was unable to give any detail on the number of taxis the company would assemble.
There are also rumours of an Indian company testing the market locally, and there are various smaller operators who offer taxi conversions to their vans, such as the Peugeot Boxer and Mercedes Sprinter.
All of this would suggest that there is potential for over-capacity in the manufacturing and assembly of minibus taxis in South Africa.
Mr Jessup is quick to point out that BAW South Africa is not only interested in the local market, but also in exporting to sub-Saharan Africa.
However, it is Nissan South Africa, which has extensive export links across Africa and sends its bakkie and car products all over the continent, that is perhaps best placed to take on the might of Toyota South Africa’s powerful mix of manufacturing prowess, economies of scale and export capacity and expertise.
The fact is that exporting vehicles from South Africa to the rest of the continent is expensive, complicated and filled with logistical and infrastructural challenges.
This, perhaps, is where BAW South Africa faces its greatest challenge.
Nissan and Toyota have long-established networks while BAW South Africa has a long, long way to go.
Another problem is the quality of the product, which is untested. Certainly, according to James Chung, 24.5% shareholder of BAW South Africa, there are about 20,000 Inyathis on South African roads.
No statistics are available, but the fact remains that the Inyathi is a thinly veiled copy of a previous-generation Toyota HiAce of unknown quality, it does not have ABS, airbags or crumple zones, and it does beg the question — why is the Industrial Development Corporation (IDC) so keen to add more of these vehicles to the nation’s fleet?
Price, in a word, could be the answer. The Inyathi costs about R180,000.
The "luxury" BAW the company also wishes to assemble here (which at least has antilock brakes) will retail for about R30,000 less than the genuine Toyota Ses’fikile it resembles so remarkably.
The question remains why the IDC has opted to invest in an operation that faces such grave business challenges.
Its spokesman Mandla Mpangase says the organisation wishes to increase competition.
"The South African minibus vehicle market is currently dominated by only one player — Toyota — which holds over 70% of the market. We believe BAW South Africa will increase competition."