What the government, automotive sector and private sector are doing to ensure the industry is safeguarded from yet another economic downturn

The automotive industry is a major driving force of the economy. Considered one of the country’s most important sectors, it makes up 6% to 7% of South Africa’s gross domestic product and is a major source of employment.

The country’s aim to become the preferred automotive investment destination was drastically interrupted by the economic downturn of 2009. Dozens of component manufacturers closed their doors, vehicle assembly plants downsized dramatically, and tens of thousands of workers lost their jobs as export and sales figures in the domestic and international markets crashed.

The industry, along with trade unions such as the National Union of Metalworkers of South Africa (Numsa), approached the government for assistance to combat job losses and the sharp decline in growth and sales. As a result, the Department of Trade and Industry (the dti), the National Association of Automobile Manufacturers of South Africa (Naamsa) and the National Association of Automotive Component and Allied Manufacturers (Naamcam) formed a task team to formulate a strategic response to the crisis. The government announced a multibillion-rand plan to aid the industry, and allocated R870 million in the form of production subsidies over three years under the Automotive Production and Development Plan (APDP).

The automotive industry began to pick up speed again in 2010, and Naamsa reported that the sector showed strong growth. Vehicle production increased by 26.2%, new vehicle sales increased by 24.7% (compared to 2009), and the country was ranked 24th in global vehicle production with a market share of 0.61%. Contributing to the growth was the fact that Europe is South Africa’s most important trading partner and accounted for 28% of the country’s total imports and exports of R1.17 trillion in 2010. Specifically,
automotive exports – which encompass vehicles and components – to the European Union totalled 47.6% (or R33.1 billion) of the country’s total automotive exports of R69.5bn.

The growth trend continued throughout the industry in early 2011 until the European debt crisis began to snowball raising concerns about the future of the South African automotive industry. The impact of the depressed European economy has come as a warning to manufacturers such as Toyota, that there will be a sharp decline in demand for their products.

Having suffered setbacks from the earthquake in Japan and flood in Thailand, coupled with the turbulent financial markets, Toyota is reserved in its estimation of growth for 2012, stating that figures are expected to remain flat compared to 2011.

Volkswagen South Africa also suffered the effects of the export-driven economy and European debt crisis. At the end of 2011, it announced significant staff reductions at its plant in the Eastern Cape. Having employed 887 contractual workers at the start of the year to fulfil an unexpected order, the company is unable to retain more than 154 staff members for between three and six months, now that the order has been completed.

News of the decline is an enormous setback to the sector’s goal to steer itself back to its peak before the recession. Furthermore, it put a halt on the government’s plan to make 2011 the year of job creation in line with the New Growth Path – an initiative geared toward creating five million jobs by 2020, with the long-term aim of turning to strong sectors such as manufacturing and automotive to boost the economy.

Having identified the automotive industry as a key growth sector and “an engine of the economy”, the government has reaffirmed its commitment to collaborate and support the sector to ward off job losses by implementing various programmes created after the last downturn. The APDP and Motor Industry Development Programme continue to be important industrial policy tools to support sustainability within the motor industry. Funds from the Industrial Development Corporation (IDC) are also being used to build capacity in the sector.

In direct response to looming job losses, the government stated it will continue to work with the industry to develop and hone skills to ensure South Africa remains a preferred location of world-class vehicles. It would continue to encourage domestic manufacturing and production of automobile products to create more jobs within the country.

In working alongside the sector, the focus would broaden to include not only the provision of decent employment, but also implementing the necessary training to enhance the industry’s capacity and meet the challenges facing the sector, some of which include a lack of skills and unstable labour relations environment.

The Gauteng Provincial Government’s Automotive Industry Development Centre (AIDC) has developed and launched a series of Web-based services for the industry, which includes a database of retrenched workers. Its services focus on small business development, and aim to create and sustain jobs. The retrenched worker database offers corporates a pool of candidates to source and reintegrate staff with the right skill set into
the workforce.

The AIDC offers a directory of goods and services offered by small and medium enterprises and co-operatives as well as a call centre that offers support services to businesses struggling to successfully navigate the challenges facing the industry. The programme was one of the initiatives devised by the Naamsa, Naamcam, Numsa and the dti task team and is funded entirely by the Gauteng Provincial Government.

The database will be used in conjunction with a number of government programmes that will help retrenched workers, including the Manufacturing, Engineering and Related Services Sector Education and Training Authority (merSETA) Retrenchee Assistance Plan (RAP).

The Seta launched its R80-million RAP to manage large-scale retrenchment and reduce the effects on all parties involved. The money will be used for further training, with the aim of preventing job losses and declines in employment. The plan to reskill the workforce is in addition to financial assistance for companies to train staff on-site and the organisation’s learnerships and apprenticeships.

While nothing is certain, the automotive sector – in collaboration with other bodies – has gone into overdrive to prevent the industry from coming to a standstill. In spite of the volatility of the situation and contributing factors, the sector remains a promising and revered component of the economy – one that is being carefully guarded and supported to ensure its continued growth.

And while everything is being done to minimise job losses, a longer term vision to build skills and productivity in the automotive workforce will ensure the sector continues to drive the South African economy well into the future.

Taryn Springhall