Should South Africa Welcome New Car Factory Investments That Create Fewer Local Jobs?

What is this article about?

This article asks whether new investments in car factories in South Africa are really good for jobs. It says that some new factories just put together imported parts and do not create many local jobs. The writer thinks we should only support investments that build local supply chains and create many jobs.

Different types of car manufacturing

There are two main ways to build cars in a country:

• CKD (Completely Knocked Down): The car is built locally from mostly local parts. This creates many jobs in component factories and other businesses.
• SKD (Semi-Knocked Down) and WI-CKD (Wholly Imported CKD): The car is assembled from mostly imported parts. This creates fewer jobs and does not help local suppliers.

Why CKD is better for jobs

Traditional CKD manufacturing supports about 115,000 direct jobs in vehicle and component manufacturing. It also supports up to one million indirect jobs in areas like transport, dealerships, and services. For every direct job, 21 more jobs are created in the economy. About 70% of the direct jobs are in component making, which only exists because of CKD.

The problem with new investments

New investors, especially from China, often bring SKD or WI-CKD factories. These factories import most parts and only do simple assembly. They create far fewer jobs and do not help local businesses. The writer says these investors are not held to the same standards as older manufacturers like BMW, Toyota, and Ford.

What should be done?

The writer thinks South Africa should learn from Brazil, which forced investors to move from SKD to CKD over time. This increased local content from 20% to 60% in a decade. Policymakers should make sure new factories commit to using local parts and creating many jobs, not just bypassing import taxes.

Why this matters for your career

If you work in car manufacturing or related industries, these decisions affect your job. More CKD factories mean more jobs for you and your community. If we allow too many SKD factories, we could lose the deep supply chains that support hundreds of thousands of jobs.

This article was originally published on Daily Maverick.