General Motors, a U.S.-based company that designs, manufactures and distributes vehicles and vehicle parts, announced on Thursday that it was pulling out its investments in South Africa and India. The company said it negotiated selling off its Struandale vehicle assembly plant in Port Elizabeth to Japanese vehicle company Isuzu.
GM says it was withdrawing because South Africa can no longer "provide GM with the expected returns of other global investment opportunities", adding that their strategy is changing due to "significant" global movements.
Many reacted to the news with shock. The Democratic Alliance attributed GM's disinvestment as a consequence of actions by President Jacob Zuma.
GM's withdrawal is "sadly just one of a growing list of foreign investors who are fast losing confidence in our struggling economy, following the President's reckless midnight Cabinet reshuffle, and the subsequent ratings downgrade of our economy" said the opposition party in a statement on Thursday.
Trade and Industry Minister Rob Davies disagrees with this view. He told Business Day GM's disinvestment announcement came at no surprise given that GM South Africa had been on a downward sales path for some years. He said the annual Struandale vehicle production was well short of the 50,000 required to gain full access to government's automotive production and development programme (APDP).
Frost & Sullivan Mobility Africa programme manager Craig Parker, shared similar views to that of Davies.
"This has definitely been coming for quite some time," said Parker. Parker is doubtful that the Cabinet reshuffle and ratings downgrade played any serious role in GM's disinvestment of South Africa. "Looking at the way corporates make decisions. I really doubt that this [the] would have really impacted GM's decision".
According to Parker, there are a number of factors at play informing GM's withdrawal from its South African division. Parker said GM's move is part of a "broader strategic refocus" of its international business, highlighting that GM pulled out of India too. Parker says that GM's emerging market focus has been "off" for a couple of years in Africa, Latin America and Asia.
"Across the board, they haven't been doing well" in that its growth has note not reaped satisfactory profit margins. Parker furthered that the demand for GM's vehicles has not been high in South Africa, long before the recent economic downturn.
This is the second time GM has disinvested from SA. The first was in the 1980s when it it sold its operations to local shareholders, citing apartheid and sanctions pressure. It was a buyback clause in the sale that allowed GM to return to South Africa at the dawn of its democracy. National Union of Metalworkers of South Africa (Numsa) said that it is "shocked" by GM's move, and according to Numsa, most GM employees are members of the union.
GM South Africa said on Friday the corporate currently employed 1,500 people in Port Elizabeth, of which approximately 589 will be affected by the movement. On Friday GM South Africa told HuffPostSA that it "has begun the consultation process".
On Thursday in a statement, Numsa, said "as a trade union we are surprised that GM chose to convey this announcement in this way [at a general meeting]. There was no consultation with the union, and furthermore, the company has not divulged any details about the fate of its employees affected by this restructuring. By shutting down operations in South Africa this will have a major impact not just on GM plants, but for companies along the value chain as well."
GM South Africa says that its consultations process will be facilitated by the CCMA commissioner, which is set to take place over the next 60 days.
As of the beginning of 2018, Chevrolet vehicles will no longer be sold or manufactured in South Africa. GM said that it would "phase out manufacturing and sales of Chevrolet vehicles". GM Motors said all existing Chevrolet, Isuzu, and Opel vehicles, and on-going resales will continue through the existing GM dealer network to the end of 2017 and that all existing warranties and service plans remain in place and will be honoured by Isuzu dealers "until the details of discussions with PSA have been finalised", GM has said.