The Covid-19 pandemic has put South Africa’s automotive industry under pressure in delivering most of the targets it agreed to in the Automotive Masterplan, which was implemented at the beginning of this month.
However, Mikel Mabasa, CEO of automotive business council Naamsa, said there is no reason for the industry to panic yet.
Mabasa said the main reason the sector is under pressure is purely because of the impact and disruption caused to the industry globally and in South Africa by Covid-19.
He said agreement was reached that there would be five-year reviews of the progress made with the implementation of the masterplan.
Once the Covid-19 pandemic has passed, the industry will be able to assess and see if it is on course to achieve the targets it set for itself and if there is a need “to revise them or not”, he said.
“The masterplan is a 15-year programme to 2035. There is still a long way to go to 2035. We are not panicking yet,” said Mabasa.
“We are comfortable that we will be able to look at some of the challenges that potentially could slow us down, and it will certainly be important to talk about those potential areas, but we don’t think it would be fair for us – at the beginning of any programme – to already talk about extending it.
“For now, it’s definitely premature to speak of any extensions at this time,” he said.
The objectives of the SA Automotive Masterplan 2035:
The production of 1% of global production, which is projected to be 1.4 million units by 2035.
Increase local content in South African assembled vehicles to 60% from less than 40% currently.
Double industry employment to 224 000 people.
Improve manufacturing competitiveness levels to the same level as leading competitor countries.
Transform the industry across the value chain.
Deepen value addition, particularly for supply to regional markets.
Mabasa believes all the outstanding issues in the masterplan were resolved prior to its introduction on July 1, with the government responding to the threat posed by the acceleration of the global automotive industry to new energy vehicles through the publication of an Auto Green Paper on the advancement of new energy vehicles in South Africa.
Read: Government takes first step toward mapping out electric vehicle strategy for SA
“That process has also addressed some of the concerns we had and we are very confident that through that process that issue will also be managed properly,” he said.
Read: SA vehicle manufacturers want Automotive Masterplan reviewed
National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal said Naacam was part of the significant consultation and engagement in developing the masterplan and is satisfied that it is in the long term best interests of the sector.
Increased localisation ‘crucial’
Moothilal said the masterplan development process involved the automotive sector committing to a range of objectives and, from a Naacam perspective, the objective around 60% localisation is absolutely crucial.
He believes “things could have been done differently to accelerate a move towards 60% localisation levels” but, taking into account the interests of other stakeholders, is comfortable that over the longer term the changes in policy and the objectives of the masterplan should result in higher localisation in South Africa and benefit Naacam members.
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Moothilal stressed that from an economic perspective, it is only in the component manufacturing base that true economic benefits can be extracted.
“OEMs [original equipment manufacturers] are obviously drivers of the value chain but the real employment, new business creation, technology transfer … happens in the supplier base,” he said.
Moothilal believes the automotive sector is cautiously on the road to recovery following the emergence of Covid-19.
“The masterplan is being implemented over a fairly long period leading up to 2035. At this stage I don’t believe it will be impossible for us to achieve the targets as set out,” he said.
Moothilal said the first half of last year was not great for the entire automotive sector, including vehicle assembly and component manufacturing, but the last quarter of 2020 and the first two quarters of 2021 have been positive in terms of components produced and sold to OEMs domestically and component exports.
“Interestingly last year all categories of automotive exports were down except for components, with a record of R54 billion in components exported in 2020,” he said.
Department of Trade and Industry and Competition chief director for automotives Mkhululi Mlota highlighted a number of challenges the automotive industry faces in achieving the targets in the masterplan in a presentation last month to the parliamentary select committee on trade and industry, economic development, tourism, employment and labour.
Exports … and imports
Mlota said South Africa remains a very small market and accounts for less than 6% of the global market.
He said this is complicated by the fact that South Africa is located very far from other markets to which the industry exports, which also raises other competitiveness issues, such as logistics costs.
Mlota said the regional market has potential but is undermined by the absence of a common automotive regime.
“Most, if not all, the countries in the continent do allow the importation and use of used vehicles.
“Even in SACU [Southern African Customs Union] some of the countries, including Lesotho and Botswana, allow the importation of used vehicles from the East or Middle East, which [negatively] affects the total market.
“Another complication we are seeing recently is that some of those vehicles, while destined for neighbouring countries, end up being driven on local roads while South Africa does not allow the general importation and distribution of used vehicles,” he said.
Mlota added that the local content in the vehicles that are produced locally is rather low at about 40%, which needs to be actively addressed if South Africa is to create further employment in the industry.
He said some of the markets to which South Africa’s automotive industry exports vehicles are introducing stricter emission standards.
This has led to some countries indicating that in the next few years they will totally ban the importation and distribution of petrol and diesel engine vehicles in favour of new energy vehicles, mainly electric vehicles, because of tighter emission standards, he said.
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“We don’t produce such vehicles in the country so that puts the business case for the local assemblers at a risk,” he said.