Volkswagen South Africa to Invest $235 Million

JOHANNESBURG, Dec 11, 2002; Lucia Mutikani wrting for Reuters reports that Volkswagen AG's South African unit said it would invest about 2.1 billion rand ($235.2 million) in its domestic plant over the next six years as it gears up to broaden its export range.

VWSA is among several vehicle manufacturers that invest heavily in South Africa's motor sector, taking advantage of a government incentive programme to boost vehicle exports.

The sector is the country's second-largest industrial employer, contributing about 5.7 percent of the 975.1 billion rand ($106.1 billion) gross domestic product (GDP) in 2001 and employing some 281,500 people.

Volkswagen South Africa (VWSA) managing director Hans-Christian Maergner said the self funded investment in its Uitenhage plant in the Eastern Cape would enable the company to add its new Polo range to its multi-billion rand export orders.

VWSA was in 1998 awarded a contract by its German parent to build 68,000 new generation Golfs for the United Kingdom market over 18 months. The contract has since been extended to cover other parts of Europe.

"It's a vote of confidence in this country and will enable the company to offer further exciting products in the years ahead," Maergner said in a statement.

"We expect that we will continue, or even slightly increase, our number of fully built up exports in the coming months."

The announcement comes on the heels of a government decision earlier this week to extend its Motor Industry Development Programme (MIDP), aimed at boosting vehicle exports.

The MIDP -- introduced in 1995 as a five-year plan to open up the industry to global competition -- was extended to 2012 from 2007.

VWSA has produced 77,000 units, with 30,000 Golf G4s exported to Europe and the United Kingdom. Analysts reckon VWSA contributes around one percent to its parent company's total turnover.

"In September (2002) we attained an overall milestone of 125,000 Golf G4s exported to Europe and the United Kingdom," Maergner said.

"Despite the current slump in global demand, we will be expanding the countries that we export to and will start delivering new Polos in addition to the Golfs we currently export."

According to the National Association of Automobile Manufacturers of South Africa, capital investment by motor manufacturers is currently in excess of 12.5 billion rand.

Manufacturers such as DaimlerChrysler AG, Volkswagen AG and Toyota Motor Corp have also awarded multibillion rand export contracts to their South African subsidiaries.

"We are working agressively in increasing our component exports to the Volkswagen Group from the 1.6 billion rand worth that were exported this year," said Maergner.

Last year, new vehicle sales in South Africa rose to 366,899 units from 341,082 in 2000, with revenue from the motor trade jumping to 94 billion rand from 81 billion.