As much as R60bn could be invested in the South African vehicle and component manufacturing industries in the next five years according to Andrew Kirby, President of the National Association of Automobile Manufacturers of South Africa (Naamsa) and CEO of Toyota SA Motors.
He was a keynote speaker at the annual Naamsa Conference at the Kyalami Conference Centre on August 22, as part of the Festival of Motoring presented by WesBank and organised by Messe Frankfurt South Africa.
Kirby said this amount could be made up by R40bn in direct investments by the seven vehicle manufacturers with an additional R20bn going into component making.
Kirby said the local motor industry was not only leading the drive to increase industrialisation in the country but also employed 407,000 people directly. He said that this number could be tripled either directly or indirectly in the overall automotive industry.
Kirby said the industry was healthy in terms of having a positive balance of trade account with the number of exported built-up vehicles and components growing steadily. However, he stressed the importance of being globally competitive in terms of cost, quality, and reliability of supply as several other countries were eyeing SA’s automotive export markets.
Kirby said that major developments were required in the three sectors of the value chain, with vehicle manufacturers embracing advanced manufacturing technologies to boost productivity and quality, while the component sector needed to urgently develop Tier 2 and 3 suppliers and the dealers and retail sector needed to transform and uplift the informal sector.
“Growing production volumes, increasing localisation significantly and using the latest technologies in all aspects of the business are vital to transform the South African automotive industry and to this end the aim was increase output from the 610,000 vehicles made in 2018 to 800,000 in 2023,” explained Kirby.
“We expect local procurement to grow by R12.6bn in the next five years together with a 14% increase in direct employment, which equates to creating another 16,000 jobs, mainly in the component manufacturing sector as local content grows from 39% to at least 42%.”
Kirby added that raw material beneficiation such as making automotive grade steel in SA was a priority and he was pleased to hear that the local steel industry was currently investigating these potentially valuable developments.
Also speaking at the conference, trade, industry and competition minister Ebrahim Patel said the government realised the importance of a healthy and growing motor industry and identified six focus areas to drive the industry forward.
The Motor Industry Masterplan, which was announced last November, by 2035 aims to grow local vehicle production to 1% of global output, double employment, increase local content to 60%, improve global competitiveness and achieve transformation, he said.
The first area of focus is expanding existing markets and seeking new markets. Last year the motor industry exported products valued at R180bn, which equated to 14% of the export basket, with R32bn worth of these products going into Africa, which Patel said could grow significantly when the African Continental Free Trade Agreement comes into operation next year.
The second focus area is supporting improved industry performance by adapting new technologies including electric vehicles and autonomous driving. Patel said he believed SA could be a supply base for these advanced vehicles as a manufacturer and exporter without building a local infrastructure for these types of vehicle.
The third is to attract investment into the industry, with the aim of increasing localisation substantially at SA’s seven original equipment manufacturers (OEMs) and component manufacturers. The government is supporting this drive and to this end the next government investment conference will be held from November 5-7
The fourth focus area is transformation and the building of an inclusive economy, and the national Automotive Transformation Fund of more than R4bn — funded by the seven OEMs — will be activated to assist the establishment of black-owned companies.
The fifth area is the availability of equitable spatial zones which can be developed into supplier parks and the like. Already a special economic zone (SEZ) is being planned for Tshwane which will have an area similar to 200 football fields. This aspect of support is to assist in improving the competitiveness in terms of cost and quality for locally made vehicles.
The sixth focus area is to improve the capability of state-owned enterprises (SOEs) such as Eskom, through better co-operation between role-players to enhance the performances of SOEs using partnerships with private enterprises to develop best practices.
“We want a large and successful automotive industry infrastructure with the state providing an enabling environment,” concluded Patel.