Sumitomo invests ZAR$ 2B in a South Africa tyre plant

Ladysmith plant Ladysmith plant

About 420 new jobs are to be created by a R2 billion two-phase investment by Sumitomo Rubber South Africa to upgrade, modernise and expand its tyre-manufacturing plant in Ladysmith in KwaZulu-Natal.

Riaz Haffejee, the chief executive of Sumitomo Rubber SA, said yesterday that the R1.1 billion allocated in the first phase by parent company Sumitomo Rubber Industries in Japan commenced in 2014 and would be 95 percent complete by the end of the year.

The R910 million second-phase investment had commenced in January and would be completed by the third quarter of 2018, he said.

Investment in the first phase was used to upgrade and modernise the plant’s capacity. It was aimed at increasing the output of high-quality passenger and sport utility vehicle (SUV) tyres in response to increased demand for SUVs.

Donated

The second-phase investment is focused on the introduction and manufacture of truck and bus tyres on a tract of underutilised land adjacent to the existing plant that was donated to the company by the Emnambithi-Ladysmith Municipality.

Haffejee said the investment programme was aimed at consolidating the company’s production at one facility in Ladysmith because Sumitomo Rubber SA previously used to also produce tyres at the old Dunlop factory in Durban.

“By putting the factories side by side there are a lot of synergies with raw materials and compounds,” he said.

Haffejee said the first 120 new employees needed over the next few years had been recruited and a further 300 would be recruited during the second phase, increasing total employment in the plant to more than 1 200 on completion of the second investment phase.

Responsible

He said the investment programme would increase the capacity of the plant by 30 percent to a total output of 13 000 passenger and truck tyres by the end of 2018.

He said Sumitomo Rubber SA was making the investment despite the continuing competitive threat from cheap imported tyres.

Riaz Haffejee, CEO of Sumitomo Rubber South Africa (SRSA)
Riaz Haffejee, CEO of Sumitomo Rubber South Africa (SRSA)

Haffejee said about 60 percent of the truck tyres in South Africa were imported, while about 40 percent of passenger car tyres were imported.

He admitted that the rand’s weakness in the past few years had given tyre producers “a bit more of a cushion”, while the Southern African Development Community was a good market and it was able to export duty-free into this market.

The government was also increasing duty-free markets through the planned free trade area in east Africa and the Common Market for Eastern and Southern Africa, he said.

But Haffejee said “the deciding factor” for Sumitomo Rubber to invest in the country was the Automotive Production and Development Programme and Automotive Incentive Scheme (AIS). “It would not have been possible without the AIS. It changed the investment decision scenario and allowed us to take the chance.”

He said a grant of R300 million on Sumitomo Rubber SA’s first phase investment had been approved in principle and they expected to obtain similar approval for the second phase investment.

Source: IOL