Automechanika Webinar: SA VEhicle manufacturers urged to boost trade into Africa or be beaten by foreign companies
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South African vehicle and component manufacturers are being urged to increase their pace in terms of doing business in Africa or be beaten by foreign companies. This was a strong message that came recently from Dr Norman Lamprecht, Executive Manager: Trade Exports and Research at naamsa I The Automotive Business Council and Director of the Automotive Industry Export Council.

He was speaking on an online business conference arranged by the organisers of Automechanika Johannesburg, in association with Absa and fully supported by the RMI. The topic was Intra-Africa Automotive Manufacturing, Component and Distribution Systems in Africa. This was the last in a series of six business webinars arranged by Automechanika as a precursor to its trade fair which takes place at the Johannesburg Expo Centre, Nasrec, from 7-10 June.

“The African Continental Free Trade Agreement (AfCFTA) which was introduced last year is the ideal springboard for this expansion as the African continent remains the last potential major market for vehicle manufacturers,” explained Dr Lamprecht.

“The ongoing pandemic has set the South African motor industry back three years and it needs to put its focus on growing exports and developing joint ventures in other African countries. Currently local exporters are concentrating on SADEC countries which took 81% of South Africa’s automotive exports into Africa last year. This amounted to R23.9 billion out of a total of R35 billion in vehicles, components and replacement parts shipped from South Africa into other countries on the continent last year.

“Kenya is the only country outside SADEC that took more than R1 billion in automotive exports in 2021, compared to eight countries in SADEC that beat this benchmark, headed by Namibia.

Dr Lamprecht, who has authored all 16 editions of the South African Automotive Export Annual, says that besides the free trade agreement in SADEC there are high costs in duties and logistics when trading further north, but this is where growth will come from, especially with the benefits that should flow from the AfCFTA.

However, he cautioned that there was still a need for African governments to develop appropriate policies and to cut red tape to encourage the growth of the automotive sector and it was essential for the involved governments to be fully committed to actively driving these programmes.

Thami Letsoalo, Absa’s Business Development Manager: Automotive Sector Relationship Banking: Wholesale, Retail and Franchise Business, said that the Covid-19 pandemic had highlighted the need for African countries to work closely together in terms of trade in the new, post Covid business environment.

“Holding higher stock levels for times such as these may also be a growing business trend as those with stock were able to do business in the last couple of years,” added Letsoalo.

Sejeng Mathako, Regional Head for Transactional Banking Sales at the Absa Group, unpacked the framework of the AfCFTA and said that since an initial 24 countries signed the original agreement a further 30 countries have now signed, which shows how valuable African countries view this agreement. Mathako said that research has shown that AfCFTA has the potential to lift as many as 30 million people in Africa out of abject poverty.

She said it was important to encourage small and medium enterprises (SMEs) to look outwards into Africa for growth as it is estimated that 80% of businesses in Africa are SMEs.

Justin Schmidt, Chartered Financial Analyst at Absa, said that increased activity levels in an industry boosted confidence in that sector and encouraged investments in terms of expectations for the future. He said this is where the automotive industry has the benefit of ongoing, substantial investments. An example is the R8.8 billion invested by South African OEMs and R5.7 billion invested by component makers in 2021.

All speakers on the panel said they believed now was the time for all the role players in Africa to work together to grow the automotive sector in their countries, for the benefit of their economies and ultimately their citizens.