Local is Lekker | Supporting the homegrown manufacturing industry

Local is lekker. These words – SA slang for ‘local is great’ – are more than just a catchphrase. They capture a growing call to action: support homegrown businesses. It’s easier said than done though.

In an era of online shopping and cheap imports, how do we turn those feel-good slogans into reality?

Motoring expert Marius Roberts posed this question in a recent Real Torque discussion featuring two champions of local industry - Martina Biene, Chairperson and Managing Director of Volkswagen Group Africa and Lubin Ozoux, CEO of Dunlop Tyres SA.

A proud local heritage

Both Volkswagen and Dunlop have deep roots in SA. Yet, a proud history alone doesn’t guarantee a stable future. Today, seven major automakers still have plants in SA, but the domestic market is too small to survive on local sales alone. Automakers and other manufacturers must export to survive, which exposes them to global competition and technological shifts.

As Biene puts it, “Everyone was kind of guided into exports. Now Europe is changing to electric vehicles. There is not really a policy in place for the domestic market in SA to also move towards electric.” The world is moving fast and SA’s industry must keep up.

New landscape, new challenges

On one hand, being in Africa positions companies to serve a continent on the rise. On the other, distance from major markets means high logistics costs. Simply put, it’s expensive to ship components in and finished products out.

Ozoux outlines the hurdles local manufacturers face, “Logistics, supply chains, expertise – sometimes that is a challenge,” he says. “Electricity, water, the infrastructure, all of these thing put pressure on manufacturing in terms of being able to achieve the cost levels that you want,” Ozoux explains.

Frequent power outages mean factories invest in costly backup generators to keep the lights on. Water supply interruptions and aging transport infrastructure add extra burdens – all affecting efficiency and the bottom line.

Biene agrees that SA is a gateway to African markets, but other countries are catching up. “Now I compete with cars coming from India or China,” she says. “And sometimes it feels like, unfortunately, the huge advantage from the past is not there anymore”. In her role, she is also competing within Volkswagen’s global empire to secure new investment for the Kariega plant. “My biggest competition is 110 other Volkswagen plants. I must tell our parent company why it is good to spend money here,” Biene explains.

Another challenge is the small size of the local market. With modest car sales locally, it’s hard to achieve economies of scale without exports. But exporting brings exposure to global market swings and foreign government policies. For instance, as Europe (a key destination for SA-built cars) shifts toward electric vehicles and imposes stricter emissions rules, SA factories risk losing that market unless it pivots to new technologies. “There’s not really an electric vehicle policy in place and it might not make a lot of sense,” Biene notes candidly.

This policy gap complicates long-term planning. Should plants retool for electric cars with no local demand or incentives? These strategic decisions involve multi-billion rand investments.

Labor relations have also tested manufacturers. In 2021 and 2022, strikes and unrest caused painful disruptions. Ozoux reflects, “Dunlop worked hard to rebuild trust with its workers. The turmoil, though difficult, became an opportunity to actually bring us together,” he says. Since then, management and labour have a much better understanding of each other’s positions.

A business that’s a community lifeline

Despite all the headwinds, Biene and Ozoux feel a deep responsibility to the communities that have grown around their businesses. “There’s a huge social responsibility in terms of investing and stability,” Ozoux says. “Dunlop’s factory isn’t just a profit centre on a spreadsheet - it’s the heart of Ladysmith.”

Thousands of families depend indirectly on that plant. Volkswagen’s operations in Kariega support not only 3 500 direct employees but tens of thousands more through suppliers and local businesses.

Biene notes that over the past 11 years, Volkswagen has invested about R13.4 billion just to keep the SA factory modern and globally competitive. That was largely to maintain existing jobs and production capacity. “When we announce investments, the first question is ‘How many new jobs did you create?’ – sometimes the answer is almost zero,” she says. “It’s to keep the jobs in quite difficult business environment.” Success is not only about growth. In this climate, job retention is an achievement in itself.

Both Volkswagen and Dunlop engage in extensive community upliftment and corporate social investment programmes. From funding local schools and clinics to environmental conservation projects. “We do so much more than any imported tyre brand or car brand, which comes with a cost,” Biene notes. These costs don’t show up on a price tag when a consumer is comparing a local product to a cheaper import. It’s part of the hidden value of buying local. You’re indirectly supporting all the community projects and livelihoods that the local company supports.

No wonder Roberts passionately believes not having manufacturing is the worst possible outcome for SA. If factories shut down, it’s not just a few executive jobs moving overseas – it’s whole towns and supply chains collapsing. However, many consumers don’t realise this connection.

One eye-opening moment, Biene shares, was when Volkswagen surveyed SA car buyers on their awareness of local manufacturing. “We realised that SA consumers don’t know what is really local,” she says. People might know Volkswagen has a factory here, but they didn’t know which models are built locally or that those cars contain 50% to 60% local content from SA suppliers. “I thought everyone knows… That was the first wake-up call,” Biene confesses.

In response, Volkswagen ran a Drive Local campaign to educate buyers that when you buy a Polo Vivo, for example, you’re supporting South African manufacturing and jobs. The tyre industry has launched a similar initiative called Homegrown to promote locally made tyres.

Competing with the world

Pride alone doesn’t close a sale – price and quality do. A recurring theme in the discussion was the competition from cheaper imported goods, especially from East Asia. Consumers understandably ask: “Why should I pay more for a locally made product?” Manufacturers are striving to lower costs and raise efficiency, but some factors are out of their hands.

Ozoux gives a stark example from the tyre sector. SA imposed anti-dumping duties on imported Chinese tyres to prevent under-priced products from flooding the market. “Even though we had an anti-dumping duty, the price now of Chinese tyres is lower than before,” Ozoux states.

In other words, certain foreign competitors are finding ways to undercut local prices despite trade measures. Some importers may be dodging duties or receiving heavy subsidies. “It’s not really dumping, it’s a highly subsidised industry in China,” he explains. “They want to own that industry globally. Afterwards, I assume they stop subsidising and the pricing will go back up.” It’s a long game that threatens domestic industries around the world, not just in SA.

So how to respond?

One approach is protective tariffs or stronger import enforcement – essentially trying to shield local industry.

The United States, for example, has imposed tariffs on everything from steel to solar panels in the name of protecting jobs. But Biene and Ozoux aren’t fully sold on heavy protectionism as a sustainable solution. “I’m probably less on the protectionist side, because that has a ripple effect – the next country also puts duties, then the next one. In the end we’ll all lose,” says Biene. The danger is a trade war where everyone ends up paying more.

Biene’s view is that the government’s existing incentive programme for the automotive industry – which has indeed helped keep factories running – needs an update to address today’s realities. For instance, car makers earn export credits for every vehicle shipped overseas, which they can use to offset import duties on components. But if local sales keep shrinking, those credits pile up unused.

“We generate these rebates for exporting cars, which I can’t use because of a very small domestic market,” she explains.

“Just simply revise it a bit, jointly, and acknowledge that local manufacturing is doing more for communities, for the country,” Biene urges.

“Just simply revise it a bit, jointly, and acknowledge that local manufacturing is doing more for communities, for the country,” Biene urges. If companies that go the extra mile – localising parts, reducing their environmental footprint, upskilling workers – could get a slightly bigger break, it might level the playing field against import-only rivals.

Ozoux concurs that any measures must be accompanied by local competitiveness. In other words, local producers must streamline and innovate. But when they have done so, they expect the government to crack down on illegitimate import practices that undermine local businesses. A consistent, fair enforcement of trade rules will be key.

For consumers, the takeaway is that price tags don’t tell the whole story. The cheaper tyre or appliance imported from abroad might save a few rands now, but if it contributes to a factory closure in SA, the long-term costs – lost jobs, lost skills, even tax losses that fund public services – are borne by society.

The challenge is making these hidden costs and benefits more visible at the point of purchase. Biene and Ozoux believe better communication can help. Marketing campaigns, transparency about what’s local. At the end of the day, many South Africans do want to support local. If given the choice – and if the local option is of equal quality and close enough in price – many will choose the homegrown product out of patriotism and pride.

Africa as the next frontier

While SA’s domestic market is limited, the broader African market offers room to grow.

Both industry leaders are excited by the potential of the African Continental Free Trade Area (AfCFTA), an agreement that aims to lower trade barriers across 54 African countries.

“Africa is a huge opportunity as a new car market,” says Biene. She points out that in all of Sub-Saharan Africa (outside SA), only about 111 000 new cars are sold per year – a tiny number considering the population. This is largely because affordable used cars from overseas have flooded African markets for years. If Africa starts curbing second-hand imports and encouraging local assembly of new vehicles, demand for locally made products could skyrocket.

“It’s a lot of policy work,” Biene notes. Her team and other automakers are working with various African governments to develop their automotive industries. The idea isn’t to have a car factory in every country, but to spread the supply chain. For example, countries like Ghana or Ivory Coast grow natural rubber and could produce tyre components or other rubber products. Mineral-rich countries could supply materials for batteries or electronics.

“We need to find those who do something with the mine – turn copper into copper rods. Then we find a company for harnesses,” she explains.

“In other words, industrialise step by step, so Africa isn’t just exporting raw materials and buying back finished goods.”

Ozoux shares that Sumitomo Rubber SA (the parent company of Dunlop) bought the local operation with an eye on serving Africa. “Africa for us is the future,” he says simply.

African integration must be a two-way street. Countries that agree to cut tariffs (giving up import tax revenue and exposing their markets) will expect something in return – jobs, investments or knowledge transfer. “The governments have done their job in setting the platform with AfCFTA. Now businesses need to do the work to make it a win-win,” Ozoux argues.

“Last year we started buying our natural rubber from Ivory Coast,” he says. Ivory Coast in turn is happy to open its market to the finished tyres. “It’s really in our court. We can’t wait for government. Businesses have to create those opportunities,” Ozoux stresses.

If such cooperation gains momentum, SA factories could become continental hubs, shipping cars and tyres to a huge African customer base. In return, African countries would supply inputs and also develop their own industrial capacities in synergy. This vision will take time, but it’s a compelling answer to the scale problem.

Innovating for future sustainability

Biene and Ozoux both emphasise innovation and sustainability as pillars of their strategy to keep SA manufacturing competitive.

One major focus is the environmental impact of manufacturing. SA’s electricity grid is coal-heavy, so companies are investing in greener, more dependable energy. Volkswagen’s plant has installed extensive solar panels on its premises to generate clean power.

“The goal is for the production process to be carbon-neutral by 2030 – an ambitious target only five years away.”

Alongside energy, they have programmes to reduce water usage, recycle waste and even preserve biodiversity. For tyres, the big environmental question is what happens after they’re worn out. Millions of old tyres pose a disposal challenge worldwide. Ozoux explains that in SA there’s a small levy included in new tyre sales meant to fund recycling efforts.

“The challenge is we haven’t really been able to decide where to invest this money to really turn these tyres into opportunities”.

There are many promising uses for recycled tyres – from mixing into road asphalt, to building materials, to fuel and even as raw material for new tyres. But, SA hasn’t yet scaled up these solutions.

Currently, too many scrap tyres end up in landfills or illegal dump sites or are exported cheaply to countries that will accept it. “If you have an aerial view of some of these places where tyres are being stored, it’s quite a scary sight,” Ozoux admits.

Dunlop and the industry are pushing for more aggressive recycling programmes to ensure old tyres are managed responsibly and turned into something useful, rather than an environmental hazard. This is another area where cooperation with authorities and entrepreneurs is needed – a potential green industry in itself that could create jobs.

Embracing automation and AI

Automation and AI are often seen as threats to jobs, but Biene and Ozoux see them as tools for empowerment when handled correctly.

Ozoux shares that his company encourages all employees to engage with new tech. “We tell our employees, nobody gets left behind. If you have a job and you embrace AI, you have a great future. If you have a job and you don’t embrace it, then you will get left behind,” he says. “Dunlop has launched training programmes to help staff learn to use AI and data analytics in their roles – whether it’s a clerk streamlining inventory management or an engineer analysing machine performance.” By skilling up their people, they aim to boost productivity and also make those jobs more secure.

In Volkswagen’s plant, Biene reveals they intentionally have not automated certain areas, even where they technically could. In Germany, a comparable factory might use more robots on the line, but in SA, employment is a social good, so they strike a balance. “We could have already automated much more. As long as the team can meet quality and output targets, keeping people in jobs is a conscious choice.”

Supporting local manufacturing is a shared responsibility

Business leaders like Biene and Ozoux are doing their part, investing in modernisation and community support, while fiercely advocating for their SA operations. Industry associations are working with government on smarter policies to ensure factories can thrive.

The most important player is the consumer. Every time a SA shopper or business chooses a locally made product, they are effectively investing in the country’s future. It might be as major as buying a locally manufactured car or as small as picking a locally grown tomato – it all adds up. Local purchases create local jobs and income, which circulates back into the community. It’s a virtuous cycle, but it needs conscious effort to get going.

“We need to be more conscious on a daily basis,” Roberts urges. “Think about the thing that you are buying. Where does it come from and what is the impact for our local environment?” If it’s imported, is there a local alternative of equal quality? If yes, giving that local product the nod means you’re directly supporting a SA job.

Both Ozoux and Biene remain optimistic. They’ve seen South African industry at its highs and lows, and they still believe ‘local is lekker’. They’ve lived the difference it makes in workers’ lives, in communities and in the nation’s pride.

The future of local manufacturing will no doubt require adaptation – new technologies, new markets, and new thinking. But one thing won’t change - the ongoing support from ordinary South Africans.