Why Support for the Automotive Industry in SA Is Vitally Important

Cape Times (South Africa), June 25, 2015 | Go to article overview

Why Support for the Automotive Industry in SA Is Vitally Important


BYLINE: Rob Jeffrey

SOUTH Africa is a developing economy that is still in the process of industrialising. This stage is characterised by the need to develop both its upstream and downstream industries using the wealth from its resource base.

In South Africa's case, as is the case in many other African countries, this constitutes using their mineral and labour resources to create economic growth. Only in this way, can we create sustainable economic growth and achieve our prime objectives, namely increasing employment and reducing unemployment, poverty alleviation and raising the standards of living of all citizens. The country is in real danger of doing the opposite.

Negative growth

Growth in manufacturing and mining production over the period 2008 to 2014 has been negative at minus 0.3 percent and minus 1.2 percent, respectively. Total employment growth for the economy in the period 2008 to 2014, according to the Quarterly Labour Force Survey, totalled 561 500, of which the majority has been in the community services, finance and transport sectors. Over this period some 374 000 jobs have been lost in the agriculture, manufacturing and trade sectors.

Far from growing the manufacturing, mining, mining beneficiation and the goods-producing sectors - as the National Development Plan and previous growth plans of the country have required - South Africa has in practice been de-industrialising. A good example of the importance of the goods producing sector is the automotive industry.

The sector is estimated to contribute approximately 6.8 percent (2013) of gross domestic product. The core automotive industry (vehicle and component manufacturers and assemblers) supports a wide range of business segments in South Africa, both upstream and downstream, along with adjacent industries.

The industry spans across the primary, secondary and tertiary sectors of the South African economy - from agriculture and mining, to the manufacturing and service industries. Due to its vast linkages across these industries, the automotive industry has had a large multiplier effect on the domestic economy.

The automotive industry's diverse manufacturing and components base means that the industry's exports and import substitution benefits far exceed the total costs of its import requirements.

Ideal location

The industry offers a secure base and ideal location for multi-national motor companies to locate operations aiming to export into the potentially huge African market and other markets of the world. Many motor companies have long and important historical associations with the country.

Every effort has to be made to maintain and grow the automotive manufacturing industry as a strategic long-term industry in this country, otherwise we could possibly lose out to other potential manufacturing bases of supply in Africa, such as Nigeria. …

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