Goodyear South Africa's restructuring puts over 900 jobs at risk
Yogashen Pillay | Published 2 hours ago
Goodyear South Africa's announcement on Friday to discontinue its manufacturing operations in Uitenhage, Eastern Cape, has sent shockwaves through the region, with over 900 jobs at risk due to a Section 189 notice served to the National Union of Metalworkers of South Africa (Numsa).
The decision, communicated by Goodyear's Managing Director Paul Gerrard, has raised alarm among unions, and economic analysts, who fear the closure could devastate the local economy amid high unemployment.
Mziyanda Twani, Numsa Eastern Cape Regional Secretary, said on Friday that the union is dismayed by Goodyear South Africa's announcement to discontinue its manufacturing operations in South Africa.
'The union has been served with a Section 189 notice from Paul Gerrard, the Managing Director of Goodyear Tyres in South Africa. The manufacturing plant is located in Uitenhage in the Eastern Cape, and the company envisages that at least 907 employees will be affected by the plant closure,' Twani said.
Twani added that as a region, Numsa was deeply worried about the impact on workers and their families in Uitenhage. 'It is becoming a ghost town given that ContiTech, which is part of Continental, closed down and it is also in the same tyre and rubber industry. At the same time, it may not be easy to replace these jobs. The Eastern Cape has a very high unemployment rate at 41.9% according to StatsSA.'
Twani said that while the outlook is bleak, as Numsa, "we stand ready to do everything we can to defend the jobs of our members and to negotiate fair severance packages. The dates of the first consultation will be communicated in due course".
Chris Harmse, consulting economist of Sequoia Capital Management, said he is concerned about the move.
'One of the issues could well be that the African Growth and Opportunity Act (Agoa) could be ending due to the strain on South African and American relations. This could well have led to Goodyear South Africa wanting to scale down operations at its Uitenhage plant. The Agoa most major part is made up of 60% of the motor industry, with the next largest part being the agriculture industry. We hope that if Agoa does end, other major companies don't look to scale down business,' he said.
Goodyear South Africa is the heart of business in Uitenhage. 'Another issue is that the cost of doing business in South Africa is becoming too high, including issues with electricity, water, and failing infrastructure. We could see businesses looking to move their operations to other parts of Africa and to countries like Botswana and showing a preference to use Walvis Bay in Namibia for doing business South Africa already faces steep economic challenges. We are seeing that South Africa's GDP is being revised downwards, and this does raise concern about doing business in South Africa,' he said.
Nduduzo Chala, the managing executive at South African Tyre Manufacturers (SATMC), said that he is concerned about Section 189 at Goodyear South Africa. 'However, we must remember that Goodyear South Africa has entered a consultative process, and there will be an opportunity for the government, trade unions, and other stakeholders to voice their concerns. It is not set that they would retrench over 900 workers and end operations at the manufacturing plant in Eastern Cape. We just have to wait and see how the process unfolds.'
SATMC is concerned about the possibility of the plant closing. 'It's not a great situation for us as SATMC, workers, and the Eastern Cape community, but we have to see what happens during the consultative process,' Chala said.
Dr Eliphas Ndou, an economist and author at Unisa's Department of Economics, said the manufacturing sector's contribution to GDP has become smaller over time. 'The sector faces many challenges, including low-cost imports and a decline in local manufacturing competitiveness. The decline in the latest BER business confidence index shows that most businesses are not satisfied with prevailing business conditions. Hence, the development in the tyre manufacturing sector is a clear message to the government that wants to grow the economy, create, and keep employment to fast-track the implementation of structural reforms that will improve the local manufacturing sector's competitiveness, including tyre producers.'
Ndou added that the structural reforms may help to significantly improve the tyre manufacturers' competitiveness by ensuring the availability of reliable power and water supplies, and not an above-inflation increase in administered prices. 'These factors are crucial for the local industry's competitiveness.'
BUSINESS REPORT
Visit: https://businessreport.co.za/
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Citizen
an hour ago
- The Citizen
Structural reform is silver bullet needed for SA economy to grow
The OECD emphasised the need for structural reform in its report on the economy of South Africa to grow the local economy and create jobs. After the disappointing Gross Domestic Product (GDP) figures Statistics SA announced last week that showed the South African economy grew by only 0.1% during the first quarter of the year, everybody is looking for the silver bullet that will help the economy out of its misery. The silver bullet is structural reform. According to the Organisation for Economic Co-operation and Development (OECD) Economic Surveys: South Africa 2025, South Africa's GDP is projected to increase by 1.3% in 2025 and 1.4% in 2026, but high uncertainty and declining confidence will weigh on domestic demand, although easing monetary policy will provide support. The survey found that these four issues should be tackled to help South Africa's economy grow: Sustaining higher growth hinges on undertaking structural reforms Reforms are needed to ensure higher potential growth and debt sustainability Boosting job creation and improving access to employment opportunities Reducing emissions and boosting resilience requires efficient climate policies The OECD says in the report that swiftly implementing reforms would support fiscal consolidation and investment. 'High government debt-servicing costs, close to 22% of revenues, are limiting the fiscal space available for social and growth-enhancing policies. 'Strengthening the fiscal framework through stricter spending controls and reinforced fiscal rules anchored to a stable debt target would support fiscal consolidation and help reduce the risk premium, as well as the risk that elevated government borrowing crowds out private investment. 'Swift implementation of reforms will be key to boosting the current low level of investment. Easing burdensome licensing, permits and complex procurement rules will support firm entry and expansion.' ALSO READ: No fireworks expected, but GDP figures are disappointing — economists Structural reform needed as incentives for investment to grow economy In addition, the OECD says, reforms in the electricity sector would enhance businesses' ability to operate efficiently and strengthen their incentives to invest. Lastly, creating a business-friendly environment would support rail investment needs by reforming the governance of transport state-owned enterprises, including by establishing a regulator and promoting competition. 'The increase in tariffs on imports into the US will weigh on exports. An easing in access to pension savings from late 2024 will support consumption. Inflation will fall in the near term following the decline in global oil prices but will strengthen during the second half of 2025 and in 2026, as activity strengthens,' the OECD says. The organisation expects that fiscal consolidation in 2025 and 2026 will help stabilise public debt, while reinforcing spending rules and broadening the narrow tax base would further support debt sustainability. 'Monetary policy is projected to continue easing in 2025 to slightly below neutral rates. Continued progress in reforms to improve the efficiency and governance of state-owned enterprises, increase the supply of electricity and ease logistics bottlenecks and regulation will support investment and stronger potential growth.' ALSO READ: Business confidence tanks in second quarter due to pessimism about trading conditions Decreasing consumer confidence and volatile rand However, the OECD points out, consumer confidence fell and exchange rate volatility increased. 'Consumer confidence fell in the first quarter of 2025 alongside domestic political uncertainty and geopolitical tensions, wiping out more than its increase over 2024. 'Business confidence remained above its long-term average in the first quarter of 2025, while the unemployment rate increased to 32.6% in the first quarter after decreasing over the previous three quarters. Core inflation continues to ease, reaching 3% in April, slightly above headline inflation, which was 2.8%.' The OECD also notes that the US increased tariffs on imports from South Africa to 10%, although the exclusion of certain critical minerals and bullion slightly lowers the effective rate. South Africa sends around 7.6% of its exports to the United States, limiting the impact on GDP. Spreads between South African and US long-term bond yields increased in recent months, suggesting that the perceived risk of investing in South Africa increased. The exchange rate against the US dollar depreciated sharply in early April, although it has reversed since then. The OECD also says that fiscal policy is consolidating while easing monetary policy will support activity. 'The primary fiscal balance excluding one-off items is projected to improve by 0.2% of GDP in 2025 and 0.8% of GDP in 2026. 'Revenue measures include no inflationary adjustment to income-tax brackets, adding 0.2% of GDP of revenues in each fiscal year and additional tax measures to be announced in the 2026 Budget, representing 0.2% of GDP for the 2026/27 fiscal year. 'Conversely, expenditure as a share of GDP is expected to increase in the 2025/26 fiscal year, before easing. This is driven by a 0.2% of GDP increase in water, sanitation and road infrastructure investment and exceptional debt relief for the state electricity operator, Eskom, of around 1% of GDP.' ALSO READ: Manufacturing PMI falls to lowest level since April 2020 — bad news for GDP Gold and Financial Contingency Reserve Account will help economy The OECD also says that transfers from the central bank to government accounts (via the Gold and Financial Contingency Reserve Account), equivalent to 0.3% of GDP, will contribute to debt reduction for the second consecutive year, although to a lesser extent. The organisation notes that the South African Reserve Bank (Sarb) lowered the repo rate by 75 basis points to 7.5% between September and January as inflation eased. The OECD projects that the repo rate will decrease by a further 50 basis points over 2025, but adds that further volatility in the exchange rate is creating significant uncertainty around the outlook for inflation and monetary policy. Meanwhile, the OECD expects that activity will increase moderately in an environment of significant uncertainty and projects that the economy will grow moderately in 2025 and 2026. 'Monetary policy easing and progress in electricity availability are set to support investment. 'Private consumption will benefit to some extent from the 2024 pension reform, which eases access to retirement funds. However, exports will increase only gradually, weighed down by the increase in US tariffs.' The organisation also says that as economic growth strengthens gradually and the negative output gap narrows, inflation will increase to 4.2% in 2026 while the unemployment rate will decrease slightly to 32.1% in 2026. However, the OECD warns that risks to the outlook remain high. 'On the downside, trade tensions heightened uncertainty and slower progress than expected in easing freight and port bottlenecks could weigh on activity. On the positive side, it says accelerated reform of electricity availability would strengthen the recovery in investment, boosting potential growth.'
The Citizen
2 hours ago
- The Citizen
UK trip great if planned well
If you do it carefully and with planning, staying in the UK won't be as outrageously expensive as you first thought. The tourism industry in the UK is starting to get worried because it has seen a drop-off of more than £2 billion (just over R48 billion) in revenue compared to 2019, before the Covid pandemic hit. It's worried because many other tourist markets have bounced back well from the collapse of 2020–21 and are looking to post record revenues. At the same time, there is concern that the government is about to cut the money it spends supporting Visit Britain, the tourism promotion organisation. Visit Britain predicts that about 43 million tourists will come to the UK this year, generating more than £33 billion. But, why the concern? Simply: the UK has become one of the most expensive destinations in the world. South African passport holders also have the pain of very expensive and frustrating-to-obtain tourist visas… but from this year, they are not going to be the only ones, as the UK will be introducing fees for electronic visas for most visitors from 'acceptable' countries. Travel operators in the UK feel as though the double whammy of visa fees and cutbacks for Visit Britain is shooting itself in the foot. Perhaps, though, you need to realise that either you have to lower your prices, or become more efficient – or both – to lure tourists away from the offerings of European neighbours, which are more affordable and, generally speaking, have far better weather. ALSO READ: Travel alert: Two less visa-free entries for SA passport holders Budget tips for a better stay in the UK Don't get me wrong: if you do it carefully and with planning, staying in the UK won't be as outrageously expensive as you first thought. Self-catering accommodation (as opposed to bed-and-breakfast venues) is becoming more commonplace – and significantly better, in terms of amenities, compared to 20 years ago. Interestingly, on recent trips to the UK, we found excellent self-catering places with prices not far off what you would pay in South Africa (even at 25 to one). B&Bs can also be a good option because you meet friendly people (who'll help with their local knowledge) and generally get a great breakfast to set you up for the day. Not for nothing is the 'Full Monty' (English Breakfast) known as one of the best in the world. Travelling around the UK won't be cheap: fuel is the most expensive in Europe (especially when you buy it at a motorway 'services' stop) and using trains to get around is also way more costly than across the channel – so much so that, in many cases, it is cheaper to fly between cities in the UK than it is to go by rail. But, Rule Number One: eat out as little as possible. Even simple meals will gouge huge holes in your wallet. NOW READ: As Lekker as it gets: You may not stay more than two nights
Daily Maverick
5 hours ago
- Daily Maverick
The strategic reforms that could transform South Africa's economy
The key is to break the strangleholds that Eskom and Transnet have on our electricity, ports and railways. Introducing real competition into electricity generation and the operation of ports and railways is the key to unlocking real growth in South Africa's stagnant economy. So said Deputy Finance Minister Ashor Sarupen at a seminar organised by the In Transformation Initiative last week, where Jakkie Cilliers, head of the African Futures unit at the Institute for Security Studies (ISS), presented the unit's latest report, co-written with Alize le Roux, which forecasts SA's growth trajectory to 2043. The seminar pondered why, despite the creation of a government of national unity (GNU) last June and the virtual end of load shedding, the South African economy only grew by a miserly 0.1% in the first quarter of 2025. Cilliers said South Africa was caught in a 'classic upper middle income growth trap'. From 1990 until 2025, South Africa's economy had grown by an average of 2.3% a year, and on its current path, without significant reforms, he forecast it would grow at an average 2.4% annually from now until 2043. That would expand GDP from about $402-billion in 2025 to about $628-billion in 2043, in constant 2017 US dollars. This 'slow but steady growth' would not be enough to dent poverty. It would barely keep pace with the population, which the unit forecast would expand from about 65.5 million in 2025 to about 77 million in 2043. Cilliers said annual GDP per capita would therefore rise from $12,600 in 2025 to about $14,700 in 2043 — with South Africa falling behind the rest of the world (except Africa) where he forecast average annual GDP per capita would climb from $20,300 in 2025 to $28,500 in 2043. He noted that on its current development trajectory it would take South Africa until 2037 to return to the peak GDP per capita of $13,800 that it reached in 2013. South Africa had been stagnating for years, with steady deindustrialisation, weak investment, and a growing dependence on social grants undermining growth, particularly during the Jacob Zuma presidency, Cilliers said. Cilliers noted that 740,000 South Africans entered the labour market every year, and because of slow growth and a very capital-intensive economy the number of unemployed people increased annually. In 2023, the International Labor Organization (ILO) found that South Africa had the highest unemployment rate globally after only Eswatini. Because being part of the informal sector is considered 'work' by the organisation, South Africa's relatively small informal sector contributed to this high percentage. In South Africa, only about 18% of the labour force is employed in the informal sector. Cilliers noted that about 62% of South Africans were now living below the World Bank's poverty datum line for upper middle income countries, of $6.85 per person a day. On South Africa's current economic path, that percentage would decline 'modestly' to 58% in 2043, though the absolute number of people living below that poverty datum line would increase, from some 40.9 million in 2025 to 44.4 million in 2043 (because the overall population would rise). Cilliers said South Africa should now be reaping a 'demographic dividend' because its ratio of working age population – aged 15 to 64 — to its dependent population (children and elderly) had now reached 2.1. In the African Futures calculations, the demographic dividend should kick in when the ratio of working people to dependents reached 1.7. he said, Economic growth stunted by poor human capital But South Africa was not earning this dividend largely because economic growth was being stunted by poor human capital, mainly an unhealthy population, many of whom were still afflicted by HIV/Aids and tuberculosis and low-quality education. The question, he said, was why South Africa did so poorly on social capital, education and health, given the very high levels of expenditure on those services. 'And the only answer that you can come up with is government inefficiency, the poor use of existing funds. And the question is, how do we escape the middle-income trap?' Cilliers asked. He said the African Futures team had modelled the effects of reforms in eight different sectors on South Africa's economic development. These were demographics and health; agriculture; education; manufacturing; infrastructure and 'leapfrogging' (i.e. bypassing older technologies); free trade; financial flows; and governance. They found that the largest return was from increased manufacturing, followed by freer trade and then better governance. So, for instance, all eight sectors combined would increase GDP per capita in 2043 by about 33%, from the $ 14,750 on the current path to $19,650. Of this, increased manufacturing would contribute about $930; freer trade (with the full implementation of the African Continental Free Trade Agreement) would contribute about $900; and better governance about $800. The combined impact of those eight reforms would decrease the percentage of South Africans living below the $6.85 a day poverty rate to 50% by 2043, down from 62% in 2023. This would represent 6.1 million fewer poor people than if the economy remained on its current path, though still leaving South Africa with a large poverty burden, Cilliers said. The African Futures team had compiled a laundry list of recommendations, starting with the need to strengthen governance and accountability through evidence-based policies, curtailing corruption and increasing accountability and inclusivity. Deputy Finance Minister Sarupen, of the DA, said much of Cilliers' analysis resonated with assessments by the Treasury's own economic policy team and the work being done by the government's Operation Vulindlela and by various parties in the GNU. He agreed that merely 60% growth in the size of the economy over the next two decades 'will not get us out of the trap that we're in' and that South Africa was in danger of falling from upper middle to lower middle income status. Structural constraints The low growth was driven by structural constraints, weak productivity, low investment in capital, higher inequality and an underperforming formal labour market. The Treasury was 'acutely aware of this'. But he said the government had to prioritise its reforms to tackle the problem because of the many competing demands of a massive amount of social ills and a very strong active civil society. He noted that South Africa had a system of fairly autonomous government ministries that made it harder to pursue coherent policies. Cilliers had identified manufacturing and freer trade as South Africa's best paths forward. Sarupen noted that cheap reliable energy with stability of pricing and supply underpinned manufacturing and industrialisation . 'And one of the drivers of our de-industrialisation has been excessive pricing and inefficiency of supply that really hurts manufacturing in South Africa,' he said. He noted that while prices in the rest of the economy had risen 196% since 2009, Eskom's prices had increased by 403%. So Eskom was driving inflation and deterring investment. Sarupen added that part of the reason GDP growth had been so low over the past year, despite an end to load shedding, was because companies had sunk so much money into load-shedding-proof themselves over the past few years that they had not spent enough on actual business expansion and employment. Sarupen also noted that free trade — another key reform advocated by Cilliers — 'requires you to be able to actually move goods and services cheaply and easily around, so the logistics reforms need a lot of depth and need to maximise competition. 'And so in the reform process that we're undergoing we need to be careful to not just bring the private sector into Transnet's monopoly structure. But rather how do we create competition, across multiple ports for example.' Likewise, South Africa had to maximise competition in railway freight lines. He agreed with Cilliers that crime had to be tackled much better as it was discouraging investment as well as acting as a deterrent to economic activity inside South Africa because, for example, citizens were fearful of using public transport to go to work. Rule of law He said the rule of law was the foundation of all other economic reforms, followed by macroeconomic stability, and then better education and health, and only after that global competitiveness and industrial masterplans. Sarupen did note though that South Africa's foundation of macroeconomic stability was 'probably one of our saving graces'. He also said that the government had to reduce debt. He noted that about 90% of South Africa's debt was denominated in rands, and about 75% of that was purchased by domestic markets. Rand debt was generally better than debt in foreign currency but the scale of government borrowing, about R300 to R400-billion a year, was crowding out the amount of capital that could be invested in business ventures and therefore growth. He added that the relatively high premium of about 11% on a 10-year South African Government Bond was discouraging businesses from investing in riskier ventures. He noted that many of the investments in this year's controversial national Budget were important — such as in public transport. He said, for example, that while a lower income worker in Vietnam earned a similar wage to a lower income worker in South Africa, the Vietnamese worker spent about 10% of his or her income on transport, the South African workers spent around 50%. 'People are going to work to earn money to be able to go to work,' he said. And this was diverting money away from workers buying goods and services, which was essential for economic growth. DM
