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THE AUTOMOTIVE SECTOR’S APPETITE TO INVEST IS SOLID
naamsa welcomes President Cyril RAMAPHOSA’s emphasis on government’s collaboration with the South African automotive industry during the COVID-19 affected 2020. The President’s reference to the ongoing announcements of significant investments in the country’s automotive industry underscores the confidence in the country by the automotive industry and all its multinational corporations partners.
During his SONA speech, President RAMAPHOSA underscored that “by the end 2020, the sector had recovered around 70% of its normal annual production, under challenging circumstances. The automotive sector's recent investment announcements prove that the industry is committed to the country's economic recovery and growth prospects”.
“Ford Motor Company announced a R16billion investment to expand its manufacturing facility in Tshwane for the next-generation Ford Ranger bakkie. This investment will support the growth of around 12 small and medium enterprises in the automotive component manufacturing. The Tshwane Special Economic Zone procurement spend on construction amounting to R1.7billion will be allocated for SMMEs”.
“Toyota has invested in their KwaZulu-Natal facility to start production of the first generation of hybrid electric vehicles to come off a South African assembly line. This follows investment announcements by Nissan, Mercedes Benz and Isuzu in expanded production facilities, all of which cement South Africa’s position as a global player in auto manufacturing”.
Additionally, the R6,0billion Automotive Industry Transformation Fund [AITF] industry-wide initiative, earmarked to transform the industry by broadening and deepening the participation of black and historically disadvantaged entrepreneurs, in efforts to grow and develop the South African automotive industry is now fully operational. Currently, along with the seven OEMs, 32 multinational Tier 1 component suppliers are in the process to join the AITF while truck and bus companies, as well as independent vehicle importers, will be applying to join the Fund soon.
naamsa CEO, Mikel MABASA said the entire domestic motor industry suspended local production of all vehicles under Level 5 of the nationwide COVID-19 lockdown restrictions at the end of March 2020. “After extensive consultations with Government, vehicle production eased back into partial operation under Level 4 in May 2020 and was able to commence full operation under Level 3 in June 2020”, MABASA said. Our collaboration with Government was instrumental in accommodating the automotive industry [the country’s largest manufacturing sector, at 27,6%] to be able to commence with vehicle and component production sooner.
MABASA confirmed that all the automotive key performance indicators for 2020 were undoubtedly under pressure due to the most turbulent year in the history of the motor industry globally and for South Africa. “Our sector was shaken to its very roots as new vehicle sales in 2020 declined by 29,2% and vehicle exports by 29,9%. Considering that the automotive sector contributes 6,4% to the country’s economy, accounts for 27,6% of manufacturing output and accounts for 15,5% of total South African exports, the impact of COVID-19 on the industry contributed a further devastating blow to the country’s already recessionary climate in the country.
The South African automotive industry remains the most dynamic manufacturing sector in the South African economy and is a significant driver of economic growth and development for the country. The automotive industry's performance over the past three decades has been dependent on the constructive collaboration and partnership with Government, and hence, the attraction of major investments into this sector have been stimulated by the long-term certainty and consistency provided by Government’s policy regime to support the sustainability and growth of this sector in the country. The SA Automotive Masterplan 2035 which is due for implementation from July 2021, will create a framework to secure even higher investment and production levels, and will continue to provide multinational vehicle and component companies the consistency they need to invest confidently in SA.
The growth of the automotive sector is linked to the strength of the economy. SARB has revised the SA economy for the full year to contract at 7,1% for 2021, compared to the 8,0% contraction projected last year. GDP is expected to grow by 3.6% in 2021 and by 2.4% in 2022. The IMF's 2021 Projected Real GDP is 2.8%.
IMF and the World Bank, the global economy is projected to grow 5.5 percent in 2021 and 4.2 percent in 2022. The 2021 forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.
MABASA said that naamsa is encouraged by the South African Government’s commitment to economic stabilisation and the drive for investment deepening in the country. “Since the start of COVID-19, the President has announced over R800 billion fiscal and monetary intervention; the COVID-19 social relieve of distress has been extended by three months, and R57 billion in wage through the special UIF TERS scheme amongst other stimulus relieves made available by the government. To date, Government has secured a total of 42 million doses of vaccines”.
Despite all these Government commitments, the country still faces extraordinary challenges coupled with the health sector incapacitation, the unemployment rate of 30,8%, the youth unemployment rate being a staggering 61,3%, critical employment sector performance struggling to return pre-COVID-19 records and perpetual ESKOM loadshedding. A faster economic growth, stimulation of the wheels of the economy, the stabilisation of industries and communities that have been hit hard by the scourge of covid19, and structurally transforming SA’s economy will depend on implementing prudent macroeconomic policies.