Closure of industries harms SA

File image: IOL.

JOHANNESBURG – The high levels of inequality in South Africa have been partly driven by the relative de-industrialisation of the country over the past two decades, according to Martyn Davies, managing director emerging markets and Africa automotive leader at Deloitte Africa.

Davies said that the contribution of manufacturing to GDP had declined in this period from about 23percent to about 13percent currently.

He said countries with high manufacturing value add to GDP also had low levels of inequality in society.

This was because there was no sector like manufacturing that absorbed employment, created stable jobs in the market place and diffused wealth through society and the economy, he said at the launch of a Deloitte Africa consumer perspective report on the East African automotive market yesterday.

Davies said South Africa had suffered from premature de-industrialisation.

“For our per capita income level, we should not have de-industrialised as we have, considering we have lost predominantly the lower end manufacturing, which is highly labour absorptive. It’s the textile, garments and footwear (manufacturing) that we have lost.

“We have the most sizeable manufacturing sector in the region, but relative to GDP it’s shrunk significantly, to an extent replaced by services. Employment unfortunately does not transition to services as it should have,” he said.

Turning to the East African markets, Davies said deep customer insights were the key to unlocking the automotive markets in this region.

“The lack of sufficient purchasing power combined with the massive mobility need and many aspiring consumers mean that industry players need to re-examine where and how they position themselves within the customer journey.

“This will enable them to take full advantage of the nascent East Africa automotive market,” he said.

Mike Vincent, consulting leader automotive at Deloitte Africa, said the automotive sector in Africa was dominated by second-hand and grey imported markets, with access to finance a major challenge and most people using cash to buy vehicles.

Vincent said there were also massive challenges in getting vehicles into these markets, because of very high tariff barriers.

Simphiwe Nghona, head of vehicle and asset finance at Standard Bank, said there were massive opportunities for banks in these markets.

Nghona said a key component to addressing the affordability and access to finance issues in these markets was to co-operate with new car manufacturers to develop schemes that addressed these issues.

Jim Dando, the director of sales and operations at Nissan South Africa, said they had established a semi-knocked down (SKD) plant in Nigeria and started negotiations with the government about an automotive policy.

But Dando said the sharp decline in the oil price in 2014 resulted in funding drying up and they had gone through a rough time since then.

Dando said they saw automotive opportunities in West Africa and Nigeria and the East Africa community, but Nigeria was the leader in the development of automotive policy and other countries would have to follow.

He said Nissan ultimately wanted to be in a position where it developed a market from SKD to completely knocked down (CKD) manufacturing.

Nonkqubela Maliza, director of corporate and government affairs at Volkswagen SA, said unless governments were willing to “come to the party” and invest in the automotive sector to get it off the ground, it would not happen.