The sustainability of the South African automotive export leather sewing industry

Abstract

The South African automotive leather export sewing industry was established in about 1991, when domestic firms were exposed to international markets. The industry’s success was largely attributed to the relatively cheap labour, infrastructure, leather and tax incentives given by the South African government. Interest in investment shown by multinational companies has resulted in significant growth in the industry today.

However, at one time, the socio-political status in South Africa meant that the environment in which the industry developed was artificial. Economic, political and cultural conditions were not conducive to export manufacturing due to international sanctions.

Consequently, the leather export industry was provided with an opportunity to integrate into the international arena primarily through the Motor Industry Development Programme (MIDP). The MIDP initiative allows South African automotive companies to offset import duties against exports. This duty offset programme aims to encourage firms to focus on high volume production runs and import less popular models that are expensive to produce locally.

However, with the inclusion of the Eastern European countries into the European Union, it is expected that the market will become highly competitive. It has already been predicted by Ballard (2002) in a study on the South African leather business that the automotive leather sewing export industry is an “easy-come-easy-go” industry, with its success not linked to any intrinsic advantages South Africa possesses, but due to rebates from the Motor Industry Development Programme. Although South Africa has a number of advantages such as relatively cheap labour, material in leather hides, and a good infrastructure, the automotive sewing industry has yet to establish its efficiency when exposed to open market competition. Therefore, to create a perception of stability for international investors, the industry must seek contact with outside partners for market access, technology and process know-how through collaboration and benchmarking.

This study therefore aims to develop a discourse related specifically to the sustainability of the leather export sewing industry as it approaches deregulation.