Lobatse auto plant suffers losses in debut year
Mbongeni Mguni | Thursday May 11, 2017 18:00
PAT BW’s poor performance for the year dragged down its parent group, Pasdec Resources SA, to a ZAR38.14 million (P29.7 million) loss for the financial year ended December 31, 2016.
PAT BW is the only commercially operating entity of Pasdec Resource’s SA, which is also a subsidiary of a Malaysian company. Prior to 2015, the Malaysian subsidiary, which manufactures automotive wiring harnesses for globally leading vehicle brands such as Nissan and Volkswagen, was based in Brits near Pretoria.
The Botswana Development Corporation (BDC) powered by government support, snatched the subsidiary away through a deal involving an investment in Botswana by the Malaysians estimated at more than P200 million and the creation of 500 jobs.
The BDC signed a deal to take up P52.1 million equity in the subsidiary, while also agreeing to increase its stake in future, funding an expansion that could raise jobs to 800.
However, PAT BW’s first year has been rocked by two successive strikes by employees in Lobatse – one lasting six weeks – as tensions arose over salary negotiations and allegations by workers of maladministration.
Pasdec’s directors, in their latest annual report released recently, acknowledged teething problems mainly associated with relocating the subsidiary from Pretoria to Lobatse.
The P29.7 million losses were also driven by a seven percent drop in orders from Nissan South Africa. Nissan South Africa also contributed to the relocation delays by requesting that some of the production lines remain in South Africa until mid-2017.
The Volkswagen and Renault production lines, meanwhile, have already relocated to Botswana.
“The results for the financial year ended December 2016 reflects the challenges faced by the various activities, most of which are a direct consequence of the relocation programme being delayed,” directors said.
“Despite the financial results and challenging trading conditions, the group remains optimistic on its future growth prospects.” Pasdec Holdings directors said the delays were also due to the tardy completion of refurbishment of the Lobatse factory, which had “resulted in the incurrence of unbudgeted wage and overhead costs giving rise to an adverse impact to the company’s profitability”.
“Numerous duplication of cost have been incurred until such time all operating activities have been transferred to the Lobatse facility,” the directors said.
Prior to the latest delays, Pasdec had originally expected to fully relocate its manufacturing to Botswana by the second quarter of 2016, leaving only a supply chain centre, engineering support and financial management operations in South Africa.
Going forward, PAT BW said its focus remains on continued training of employees in achieving “above average competency levels which is a prerequisite in maintaining high levels of product quality and performance”.
The Pasdec deal, sealed after high level diplomacy involving trips to Malaysia by Trade Minister, Vincent Seretse and the Vice President, Mokgweetsi Masisi, is the BDC’s flagship project, after a period of turbulence at the state-owned development agency.
BDC managing director, Bashi Gaetsaloe has said the project is a source of pride for the agency. “This is one of those investments that prove you can set up shop in Botswana and export 100% of what you are producing,” Gaetsaloe told Mmegi Business previously.
“Pasdec is one of the flagship investments and it is very exciting.
“People take job creation very lightly, but creating even one job means there must be a strong, viable, competitive business behind that.
“It’s not like collecting firewood.”