After four weeks of output stop at its only plant in South Africa due to worker strike, BMW lost 13,000 cars in production, missed supply targets on several export contracts and took the decision to stop expansion in the country.
The strike at factories owned by seven carmakers cost the industry at least 20 billion rand ($2 billion) in revenue, according to the National Association of Automobile Manufacturers of South Africa, or Naamsa.
But, the damage to the economy may be even more severe as foreign investors threaten to scale back expansion plans as labor instability worsens – with BMW being just the tip of the scale.
“BMW has clearly had enough of the labor situation and the risk/reward of further investment simply doesn’t make sense for them,” Peter Attard Montalto, an economist at Nomura International Plc in London, said in a e-mailed note to clients. “There are many other companies thinking the same thing because of labor issues.”
South Africa relies on inflows from abroad to help finance its current-account deficit, which reached 6.5 percent of GDP in the second quarter. Most of that foreign capital has come from investment in stocks and bonds, inflows that can be volatile as global sentiment fluctuates.
) - Monday, October 14th, 2013 - filed under BMW
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Discuss: BMW’s investment stop could signal the consequences for all South African economy