The automotive industry is driving the South African economy forward

Our country relies on different modes of transportation to drive all economic activities. As is the norm for any other industry, there are noted fluctuations in the automotive industry.

Compared to other countries, the South African industry took a big knock during the economic recession. Being the deepest recession in 60 years, senior automotive executives still have a more positive outlook about the industry than last year. However, they remain watchful as they continue to face certain economic headwinds, among these being high unemployment rates, better but still constrained credit markets, and lack of clarity with regard to the impact of new government regulations and stimulus programmes.

The situation in South Africa is no different, except that the local consumer has been under financial pressure since 2007.

For executives, profitability remains a significant issue. Over one-quarter of executives who took part in the KPMG Global Executive Automotive Survey expect vehicle manufacturer profits to increase, while almost 40% expect profits to be stable, and 33% expect a decline.

“The respondents believe the winners will be those companies able to gain market share in an uncertain economic environment while also global product and supply chains,” said Gavin Maile, Africa automotive industry leader for KPMG, after the company released the survey.

The survey indicated that confidence in the growth of the South African automotive sector has shown a further improvement, with a general expectation of approximately 567 000 vehicle sales in 2011, which will be an increase of 15% compared to 2010 sales of 492 956 units.

Reasons for the optimism included confidence in the Automotive Production and Development Programme (APDP) and the Motor Industry Development Programme.

The audience of the survey included original equipment manufacturers, component suppliers, the retail and aftermarket sector and service providers, among others.

According to a report released by the National Association of Automobile Manufacturers of South Africa (Naamsa): for the first quarter of 2011, new car sales stood at 102 185 units – a marked improvement of 20 738 units, or 25.5%, compared to the 81 447 new cars sold during the
corresponding quarter of 2010.

Aggregate industry commercial vehicle sales during the first quarter of 2011 – at 45 533 units – recorded an improvement of 6 084 units, or 15.4%, compared to 39 449 units sold during the corresponding quarter of 2010.

The Automotive Industry Development Centre (AIDC) is a subsidiary of Blue IQ Investment Holdings. The institution’s mission is to serve the South African automotive industry, government departments and government agencies to grow the Gauteng province, specifically, and the global competitiveness of its automotive industry. Another goal is to contribute to the goals of the government and industry, of continuous growth and sustainable job creation and skills development.

Skills development

“To achieve the government’s strategic goals to attract and retain investments in the automotive industry, and subsequently sustain jobs, Gauteng must provide and enable the required skilled labour,” said the AIDC’s chief executive officer Barlow Manilal, speaking at a function for more than 500 learners enrolled in the centre’s human resources development programmes at the CSIR Conference Centre in Tshwane on 5 April 2011.

Through its Employment Skills Development Agency and the Talent Pipeline Programme, the AIDC has trained and assisted more than 4 000 unemployed youth in obtaining qualifications in critical and scarce skills in the automotive industry, as well as the engineering and manufacturing sectors.

The AIDC works hard in HIV/Aids awareness campaigns among its employers. A recently launched project grew out of a partnership between the German AIDS and Health Promotion Workplace Programs in Southern Africa –AWiSA Network, a project from the GIZ and German Development Cooperation – the Ford Struandale engine plant and the AIDC to fight HIV/Aids in a sustainable way in automotive supply chain companies.

Mandated by the Eastern Cape Provincial Government to assist the automotive industry in becoming globally competitive, the AIDC and its partners assist automotive organisations in implementing comprehensive wellness and HIV/Aids workplace programmes, including voluntary counselling and testing services at a fraction of the actual costs.

Investment

At a German business dinner hosted by BMW South Africa in February 2011, the Governor of the South African Reserve Bank Gill Marcus stated that the investments in the automotive industry have supported the domestic economy and include a number of significant projects that are related to export contracts being secured by local assembly plants.

She added that South Africa is making a name for itself as a low-volume, high-quality niche car supplier; and local companies have distinguished themselves internationally by exporting more advanced automotive products than most other centres of other competing countries.

The automotive sector did see a rise in demand, particularly in the export business, as a result of improved demand conditions in certain export markets.

Export sales for 2010, as recorded by Naamsa, showed a dramatic jump of 36% compared to the 2009 figure. Total aggregate vehicle sales recorded for 2010 of 492 956 units were up by 24.7% from total 2009 sales of 395 186 units.

New projects

Much focus from the automotive sector is mainly in Gauteng. A recent example of collaborative initiatives between the Ford Motor Company of Southern Africa (FMCSA) and the Gauteng Provincial Department of Economic Development is the first automotive sector broad-based black economic empowerment supplier incubation facility aimed at developing black-empowered entrepreneurs.

Another project is the production simulator facility, which will be used by FMCSA in its production initiatives.

The facility will be used by engineering students from various education and training institutions to further enhance the technical capabilities residing within the Gauteng province. At the launch of these initiatives, FMCSA expressed its long-term commitment to the South African and Gauteng automobile industry.

The company intends to transform its Gauteng assembly plant into an export base, producing some 110 000 units a year, exported to over 100 destinations worldwide. FMCSA is confident that Gauteng’s highly skilled labour as well as its world-class infrastructure can support this strategy.

This investment is estimated at R79 billion over 15 years, and is expected to contribute approximately 700 000 direct and indirect jobs in all tiers of the industry over the period.

According to the recent budget vote statement by the Minister of Trade and Industry Rob Davies, the Automotive Investment Scheme, which forms part of the APDP, has resulted in planned investments by automotive assemblers and component supplier companies of R9bn to R13bn by assemblers and R4bn by component companies. Together, these investments will support about 24 000 jobs.

A feature of these investments will be a significant expansion in local component sourcing by vehicle manufacturers.

Bongani Mtlhavani