Gauteng Business News

Send  Share  RSS  Twitter  24 Mar 2009

Business: Motor Industry Crisis Could Result in New Economic Vision


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The current motor industry crisis could be the catalyst to get a new economic vision for the South African manufacturing and vehicle production industries. This is the opinion of the CEO of the PG Group and president of the National Association of Automobile Component and Allied Manufacturers (NAACAM), Stewart Jennings, who added: “Perhaps the component industry will take the lead out of necessity.”

He was speaking on “A change in the strategy of the South African component industry” at a major motor industry conference arranged by the Retail Motor Industry organisation (RMI) on March 18 at the inaugural Automechanika South Africa trade fair at the MTN Expo Centre, Johannesburg.

Jennings said the South African component industry is particularly vulnerable at this stage; far more vulnerable than new car dealerships and far more vulnerable than the vehicle manufacturers. He pointed out that the latter were all 100% foreign owned and globalisation strategies predominate. These companies are, in the main, directly influenced and in some cases controlled from offshore and also, in many cases there are non-South African at the helm, so component sourcing can easily be switched offshore.

He added that the South African government and particularly the Treasury do not understand the challenges, importance and needs of the manufacturing sector, which makes up 16,5% of GDP, with inappropriate policies for a developing economy, because SA was not yet a developed economy and the labour market was not free. Jennings said that local component manufacturers were particularly vulnerable on short term working capital.

“Economically we don’t have a pretty picture in South Africa, but we do have a highly invested automotive component sector with capability and a number of highly skilled local component manufacturing companies,” said Jennings.

He then listed what he believed were necessary for local manufacturers and more importantly, the automotive component sector:

Aggressive cut in interest rates.

Focus on the unemployed

Focus in manufacturing, tourism and small enterprise growth activities.

More conviction from vehicle manufacturers to support the local component industry, with increase backing from both the companies’ and NAAMSA leaders.

"Deglobalisation" which is being driven by an uneven playing field, particularly from South East Asia.

There must be recognition that the current weakening of the rand is due to a drop in the country’s global competitiveness
Short term financial bridging is required from government agencies.

Government agencies must appreciate the importance of rescuing the automotive manufacturing sector as well as manufacturing in general by appropriate protection, to include “dumping” duties, tariff protection, labour productivity change to improve competitiveness and reduce unemployment, driving a “Buy South African” campaign and a move to increase the percentage of local components in SA-manufactured vehicles.
Strong lobbying from the local manufacturing sector.

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