South African vehicle exports climbed to a record in 2015, and the value of those exports sky-rocketed on the back of the weak rand.
However, the vehicle manufacturers’ export performance is in sharp contrast to the rest of the manufacturing industry.
In 2015, South Africa exported a record 333 802 vehicles, and the total value of exported vehicles and parts increased by nearly 31% to R151.5 billion.
This is according to the 2015 SA Automotive Manual that will be published soon.
Business confidence in the manufacturing industry is at a six-year low, according to the latest poll by the Bureau for Economic Research.
Despite a weaker rand, which theoretically should support exports, sales of South African products abroad and production in the manufacturing industry are under pressure, and there are job losses in the industry, according to the bureau.
In light of the weakness of the manufacturing industry and the economy as a whole, vehicle manufacturers are playing an increasingly bigger role in keeping the wheels of the economy turning.
Vehicle manufacturing, the largest subsector of the local manufacturing sector, is responsible for 33.5% of the country’s manufacturing production and, in 2015, contributed a total of 7,5% to the country’s GDP.
Norman Lamprecht, executive manager of the National Association of Automobile Manufacturers of SA, said that although the weakening rand, especially against the dollar, increased the value of South African exports, it was not the main reason the country’s vehicle exports were doing so well.
“Our motor industry is to a large extent resistant to the problems of the local economy due to it being fully integrated with the international vehicle companies’ global manufacturing chain,” said Lamprecht.
He said the exchange rate or electricity prices did not really matter because the motor manufacturers had certain targets they had to produce for parent companies.
Lamprecht further said that vehicle exports were supported by a trade agreement with the EU, according to which vehicles and parts could be exported customs-free to 28 countries, as well as through the US’s African Growth and Opportunity Act.
In 2015, the US was, besides Germany, South Africa’s second-largest export destination for vehicles and parts, with a total export value of more than R20.9 billion.
Mike Schüssler, chief economist at economists.co.za, said the vehicle industry’s success could largely be ascribed to about R20 billion in subsidies and high import tariffs on imported vehicles.
“In effect, 20c of every R100 of tax collected goes to the motor industry,” he said.
The subsidies and tariffs are stipulated in terms of the department of trade and industry’s automotive production and development programme that is in effect until 2020.
The programme is being revised and certain local manufacturers of vehicles and parts are worried that their industry will be heading for the abyss if government protections are lessened.
According to Schüssler, a decrease in subsidies for the motor industry might not necessarily be bad for South Africa. He said, although the motor industry created about 35 000 direct job opportunities, he thought many more job opportunities could be unlocked in the local food and tourism industries if they were to get the protection instead.
Xhanti Payi, an economist at Nascence Research Insights, agreed with Schüssler that the vehicle industry had achieved success thanks to lots of support right through the manufacturing chain since the 1990s.
According to Payi, government could successfully implement a model for other manufacturers similar to that followed for vehicle manufacturers, as long as each industry had its own framework and interventions.
“The Passenger Rail Agency of SA is, for example, currently acquiring locomotives. Why can we not manufacture locomotives and locomotive parts locally?” asked Payi.
By Gerrit Van Rooyen for www.city-press.news24.com