How the automotive industry helps keep SA’s wheels turning
The automotive industry is a key player and contributor to the country’s gross domestic product and employs a great number of people in direct and indirect jobs throughout the value chain.
Manufacturing remains a big cog in the automotive wheel with local manufacturing in particular remaining a backbone of the country’s industrialisation.
To get better insight into this, we attended an automotive conference held under the auspices of the National Association of Automobile Manufacturers of South Africa (Naamsa) as part of the 2018 biennial Festival of Motoring that took place at the Kyalami Racetrack in Johannesburg.
Many automotive manufacturer bigwigs were in attendance at the conference, where topics relating to the future of the local automotive industry were discussed.
One of the discussions focused on the transformation of skills and opportunities to previously disadvantaged communities.
"Broader transformation" was required in the industry to make any meaningful advancement towards empowerment, department of trade and industry director-general Lionel October told the conference.
"The transfer of skills is integral to realise higher levels of equity in the automotive segment and this includes getting more suppliers of colour into the supply value chain," October said.
"It is not just about the land issue, but rather the exclusion of 90% of the population from the economy that needs to be addressed."
The "master plan" was to move to Level 4 on the broad-based black economic empowerment scorecard from the year 2020, which would see an increase in the number of black vehicle suppliers through the automotive value chain, October said.
Another key speaker at the conference, Andrew Kirby, chairman of Naamsa and president and CEO of Toyota SA, said local manufacturing original equipment manufacturers were fully committed to the "master plan" programme.
However, there were still some challenges facing the entire value chain, he said.
Distinct to the South African market, he said, we were likely to go through a flat period for the foreseeable future, but volumes would come.
Kirby said the current total number of vehicles exported from SA was 344,000 units annually. This would need to be ramped up, but for that growth to come, the local manufacturing and export programmes needed to be globally competitive.
"To achieve global competitiveness, there needs to be a symbiotic relationship between localisation of suppliers versus parts costs," he said.
"The way forward will require a great deal of collaboration, synchronisation and an inclusive value chain between original equipment manufacturers and distributors and dealers and retailers, not to mention the scorecard progression, ownership (at dealer level) and leadership aspects that need to be duly addressed," Kirby said.
Jeffrey Dinham, an economist at Econometrix, said the automotive industry remained the fourth largest contributor to manufacturing in the country and that if SA lost its domestic automotive production, there would be no alternative or replacement industry.
That is a sobering thought, no matter how it was sliced, but the commitment from various manufacturers to continue building vehicles locally bodes well for the future of SA.
Aside from vehicle manufacturing, SA also manufactures exhaust catalytic converters for 10% of the global market, thanks to the country’s platinum reserves, platinum being a key component of catalytic converters.
Dinham also mentioned that through their various corporate social investment initiatives, original equipment manufacturers injected back into the economy about R955m between 2015 and 2017.
This emphasised the critical importance of the local automotive industry to the country’s economic health.
To this end, BMW SA has upgraded its Rosslyn plant in Tshwane to build and export its X3 model to meet global demand for the vehicle.
Mercedes-Benz has invested R10bn in its East London plant as it prepares to build the next generation of its C-Class model, which remains another important model both locally and internationally.