DAVID FURLONGER: Just when you thought it was safe to get back in the water

SA vehicle exports in September grew by 46% from the previous month and by 104.6% from September 2021. This month? God only knows.

The strike by Transnet workers, paralysing rail and harbour activities, comes just as the import/export-dependent SA motor industry is looking steady on its feet again. As Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of SA (Naamsa), put it last week: “The resilience of the sector is coming back.”

Domestic new-vehicle sales are up 13.4% so far this year, and exports 14.4%. Vehicle production is also rising. But without functioning ports, they will all suffer.

It’s not as if the industry needs another setback. Two years of Covid was bad enough. Since then, economic meltdown, rising unemployment, riots and floods have all hampered recovery. And that’s just locally. Internationally, there have been war, components shortages, reduced export demand, unreliable supply chains and soaring logistics costs. “The cost of renting a shipping container has increased more than tenfold in the last year,” says Mercedes-Benz SA (MBSA) joint-CEO Andreas Brand.

And now there’s the Transnet strike. The SA motor industry exports about 63% of the vehicles it manufactures — primarily cars and bakkies. MBSA and BMW SA export over 90%.

In 2021, the industry exported 298,020 vehicles. In its most recent quarterly review, Naamsa forecast this to rise to 345,700 this year — getting back towards the record of 387,092 set in 2019. By the end of September, the year-to-date total of 263,860 was 14.4% ahead of last year.

Also in 2021, the industry achieved its best-ever export revenue of R207.5bn — 12.5% of all SA export earnings. Of that, vehicles accounted for R138.3bn and automotive components, mainly catalytic converters, R69.2bn.

It wasn’t one-way traffic. SA imported 262,281 vehicles, worth R53.4bn, and R115bn of components; about 60% of the value of parts built into SA-made cars and bakkies are imported. That made for a combined import bill of R168.4bn — but also a healthy overall trade surplus of R39.1bn.

Add imports and exports together, and it means R375.9bn of vehicles and components moved through SA’s ports in 2021. Without unhindered two-way trade, the industry can’t function. Spare a special thought for Toyota SA, whose Durban assembly plant is trying to catch up on export orders lost during its four-month closure this year due to flooding.

Did I really refer to “unhindered” two-way trade? Even on a good day, Transnet makes life difficult for its automotive customers — just as it does for those from other industries. Its legendary incompetence costs the SA economy hundreds of billions of rands in lost export earnings every year.

Decades of broken investment promises from successive Transnet CEOs and government ministers have rendered the ports and railways incapable of meeting the needs of cash-paying customers.

The CEO of a motor company that hopes to increase production — and exports — by up to 30% in the next two years, says: “The railways are already incapable of meeting our transport needs. More volumes means we have to hire more heavy trucks to get them to the docks and to our SA customers. So the roads are damaged, Transnet turns away billions of rands that could be used to pay for the infrastructure and equipment upgrades it needs to attract new customers, and then it pleads poverty. It’s insane.”

The CFO of another company observes sarcastically: “Look on the bright side. The fact that Transnet is so inefficient actually reduces the potential damage from this strike. Imagine if we were to lose the services of an organisation that actually does its job properly under normal circumstances. The loss of business now would be far greater.”

Neither executive, whose companies rely on Transnet port services, would be identified.

Ford Motor Co Africa president Neale Hill is more diplomatic. He says: “The strike is extremely concerning for the automotive industry. The SA economy can ill afford a protracted strike that cripples our economy even further. The economy has taken massive strain off the back of load-shedding. Disrupting economic activity through the flow of goods into and out of the country further weakens the economy.”

The US-based Ford parent company is completing a R16bn investment to build the new Ranger bakkie in SA. Production at the assembly plant in Silverton, Tshwane, which has the capacity to build 200,000 vehicles annually, is due to start soon. Most production will be exported, to more than 100 countries.

Hill, who is also Naamsa president, says: “The strike damages SA’s reputation as a stable investment destination. Long strikes weaken our competitive position on the global stage. This, added to the issues around load-shedding, has the potential to jeopardise further investment decisions coming SA’s way.”

Renai Moothilal, director of the National Association of Automotive Component & Allied Manufacturers, says many SA components companies were already struggling to keep production lines going because of existing supply chain problems. Now, with the Transnet strike, “at least 25% of SA’s automotive component manufacturers are having prolonged shutdown levels”. Many more will suffer as the strike continues.

It’s a double whammy. Vehicle manufacturers, unable to build vehicles because of a shortage of imported components, are reducing local orders too. Meanwhile, SA components companies “are not able to import input material as well as capital equipment and tooling used in production”. It’s another example, he says, of why the SA motor industry needs to urgently reduce its dependence on imported components.

Moothilal says: “A continuation of the Transnet industrial action is a blow for workers in the automotive manufacturing sector, who have already had to endure almost three years of volatile earnings and employment levels, and are now faced with more short time and possible job losses, the longer it continues.”