The FINANCIAL — IFC, a member of the World Bank Group, on September 19 announced an agreement to help BMW South Africa build local capacity and support a stronger, diversified local economy through a $150 million rand-equivalent loan.
The IFC financing is part of ZAR 6 billion investment in a BMW plant in Rosslyn that will produce the new BMW X3.
The financing comes as South Africa seeks new sources of economic growth after a period of slowdown driven in part by sluggish mining and manufacturing sectors. The country suffers from unemployment estimated at 27 percent overall and nearly 50 percent among youth, according to IFC.
South Africa Minister of Trade and Industry Dr. Rob Davies said, “This partnership between IFC and BMW will help South Africa create highly skilled jobs and wages through deeper participation in the global automotive supply chain. It is aligned with the industry’s development vision of significant growth in domestic vehicle production, and increasing local content and employment across the automotive supply chain”
The auto industry—South Africa’s largest manufacturing sector—is a major employer at its assembly plants, and through suppliers of goods and services required by global vehicle manufacturers. Yet today local content accounts on average for about one-third of each vehicle produced in South Africa. IFC estimates that raising that share of local content to 45 percent could inject $4 billion into the local economy and support 80,000 more jobs over the next three years.
Mary-Jean Moyo, IFC Head of Manufacturing, Agribusiness and Services in sub-Saharan Africa said, “IFC’s partnership with BMW South Africa supports the transfer of technology and workforce skills from global auto manufacturers to local suppliers. Further investment will help make domestic companies more productive and capable of paying higher wages and contributing more through taxes.”
Investments in manufacturing is an important part of IFC’s regional strategy because of this sector’s importance for generating jobs and its ability to make other industries, such as agribusiness, health and infrastructure, more efficient and competitive. In FY16, IFC committed $1.4 billion in new manufacturing investments around the world.