Volvo Group presses brakes in South Africa
In 2015 the Volvo Group Southern Africa inaugurated an upgraded R60-million integrated regional parts distribution centre in South Africa.
The Volvo Group is applying brakes in South Africa, turning its attention to other countries on the continent.
Last year saw multinational truck original equipment manufacturer (OEM), the Volvo Group invest significantly in South Africa. Despite an already sluggish economy, the southern African arm of the Swedish multinational bolstered the infrastructure it needed to keep its premium brands of trucks operating round-the-clock.
A noticeable development during the course of the year was the opening of its new regional distribution centre in Boksburg, Gauteng. This R60-million investment houses more than 52 000 parts for, among others, Volvo Trucks, Renault Trucks and UD Trucks.
The year also marked the opening of a new truck centre in Bloemfontein and dealership in Harrismith, complemented by other investments such as upgrading its Competency Development Centre and the launch of a dedicated Used Trucks Centre.
This definitely reflects the OEM’s commitment to South Africa – something Torbjörn Christensson, president of Volvo Group Trucks Southern Africa, made known at the official opening of these facilities during 2015. Earlier this year, however, saw Christensson share a far more cautious approach to doing business in the country moving forward.[/vc_column_text]
Focus on Africa
Concerned by the drastic weakening of the Rand and the significant impact it was going to have on the group’s day-to-day operations, as well as other “negative” signals arising from South Africa, he informed that the board of Volvo Group in Sweden had decided to curtail more investment in the country. Like many other international companies with interests in South Africa, the focus has turned to countries elsewhere on the continent for now. This includes members of the East African Community, namely Kenya, Tanzania and Uganda.
Kenya and Ethiopia have been enjoying a prolonged period of construction activity. This is opposed to other areas of Africa that have felt the impact of the end of the commodities super-cycle and the drastic decline in oil price. Angola and Zambia are a case in point. Truck sales to Angola alone have declined significantly as a result of the country’s reliance on exports of the fossil fuel.
Conversely, Ethiopia is home to two of the largest dam construction projects on the continent, and has attracted many international OEMs, the bulk of which are from Asian countries. Kenya is also home to large mega-projects, albeit at a much slower pace than before the global economic slowdown of late.
The group’s growth drive into the rest of Africa will be done on the back of an expanded dealership network, a plan that was already in motion at the time of writing. At present, the rest of Africa only accounts for about 10% of all vehicles sold, but plans are under way to grow this to 30%.
More than just the drastic plummet in the value of the Rand, Christensson is concerned about the volatility of the currency, which makes it impossible to plan. South Africa still remains the main market for the OEM on the continent. And, while the group may be taking a cautious approach to investment in the country, there are still plans in the pipeline to bolster local support infrastructure here.
Equipment Africa can report that management is mulling over the timelines for an upgrade of the company’s depot in Durban, KwaZulu-Natal – a decision that will bode well for a timber-rich area of the country.
Equipment Africa says: The Volvo Group Southern Africa understands that its future growth will depend on healthy distribution infrastructure. Investments into both production capabilities and footprint are a true sign of intent. It is noteworthy to note that the attention is now turning to the rest of Africa, where better prospects of growth are signalling than the prime South African market at present.
