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Send  Share  RSS  Twitter  07 Jun 2011

MOTORING: Motor Industry Can Play An Increasingly Important Role in SA

 





Recent Gauteng Business News

The South African motor industry can and will play an increasingly important role in bringing about “a better life for all” in South Africa, according to the former CEO of the McCarthy Group, Brand Pretorius.

Speaking at a recent conference organised by the Automotive Industry Development Council (AIDC) he said the industry contributes 6,2% to the GDP, is the No. 1 industry in the local manufacturing sector, employs almost 340 000 people – making it the third largest employer in the country – and is the biggest source of foreign investment with the vehicle manufacturers’ source companies having invested R34bn since 2000.

“However, yesterday’s achievements won’t ensure tomorrow’s success as it is an ever changing and tough world out there,” said the now retired Pretorius. “ However, I am confident that the motor industry will remain a shining example to all the other industrial sectors in SA as it has proven its creativity and resilience over the years and continues to do so.”

He stressed that the industry must have the courage to face up to the never-ending challenge of global competitiveness and said that the reality is that there is still a long way to go.

“We must act decisively and continue to focus on lower costs, greater flexibility and higher levels of productivity. These are the prerequisites for long term sustainability. At all costs we must prevent an attitude developing whereby the industry accepts uncompetitiveness and high costs.

“Fortunately the future is largely in our own hands and we can attain our goals of a viable and sustainable motor industry provided all stakeholders buy into the same vision and accept co-responsibility for attaining the agreed objectives,” added Pretorius.

He said the most important factor was a common vision between government, management and labour – the so-called Golden Triangle – and it was encouraging that the government is regarding the local motor industry as “strategically significant.”

However, Pretorius pointed out that on the other hand the government was also using the motor industry as a cash cow by taxing anything on wheels with fuel levies, carbon taxes and perks taxes to name a few.

The South African motor industry needs a domestic market of 750 000 vehicles annually by 2020 to support the planned manufacturing target of 1,2-million vehicles which is the vision of both NAAMSA and the government.

This is the view of Pretorius who said the ratio of vehicle ownership in SA must increase over time from the current 130 vehicles per 1 000 people to about 170 vehicles per 1 000.

He added that this high level of growth will contribute to the motor industry boosting employment and acting as an engine for economic growth in line with the national economic strategy, which views the motor industry as “a strategically important national asset”.

However, he said that there is a long road to walk before these volumes become a reality. Added to the volume challenge is the need to deliver quality returns to shareholders and to retain the confidence of international investors, as the vehicle makers alone have invested more than R34-bn in SA since the year 2000.

“Firstly we have to become an even more respected member of the international automotive industry as a producer of world class quality products at competitive prices, with consistency of supply, a high level of expertise, adaptability and the ability to respond rapidly to changing circumstances,” added Pretorius.

He said that there are many pre-requisites for sustainable successes in the future. Here he listed a stable political and social environment that will lead to an economy with sustainable growth in the range of at least 4 - 6% per annum which will result in an increase, in real terms, of disposable income which is required to grow the domestic vehicle market to 750 000 units a year in less than a decade.

“This rate of growth will require an infrastructure that can cope with the increased business and this means that energy supply, ports, terminals, road and rail networks all require urgent attention, although the R10,3-bn investment in roads this year is appreciated”, explained the experienced industry commentator.

“We also need a regulatory environment that is conducive to growth in both domestic sales and exports. This is where we have benefitted from the MIDP since 1995 and now have the APDP, which comes into effect in 2013 and runs until 2019. These programmes are crucial to the vision of a sustainable and viable motor industry. Above all the government and its agencies need to be predicable and transparent in the way they manage these policies.

“Unfortunately we already have some negatives. One of these is the rigid labour legislation and another is a shortcoming in the APDP which offers limited incentives in relative terms, to component manufacturers. We must also arrest the ongoing rising labour costs, which are running at a higher rate than inflation, while frequent strikes are also a major negative.

“Not only are labour costs high, but we also need to make a disproportionate investment in the development of our human capital. It is vital that we encourage apprenticeships to build a stock of hands-on technical skills, because the current feeder system is inadequate,” explained Pretorius.

He also stressed the importance of developing effective, inspirational leaders as these people are the single most important advantage in every world class organisation.

Switching to the vehicle manufacturers themselves Pretorius said they must offer more affordable vehicles as this is the key that will deliver sustainable growth to the price sensitive local market. He said that marketing is also changing radically and it is no longer a “market place” but a “market space” where social networks and the internet in general play an increasingly important role. This approach applies not only to the vehicles themselves, but also to after-sales service.

Brand Pretorius said it was important that meaningful progress is made in the sustainability imperatives such as quality governance in line with King 3, the new companies and consumer acts as well as transformation in line with Codes of Good Practice, social upliftment and community involvement and the protection of the environment.

“Our industry can and will play an increasingly important role in bringing about a “better life for all”. It already contributes about 6,2% to GDP, employs almost 340 000 people, making it the third biggest employer in the country, is the biggest source of foreign direct investment and is No. 1 in the local manufacturing sector.

“I am certainly facing the future with confidence and excitement,” concluded Pretorius.


 
 
 
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