Focus on cost, efficiency - Naamsa

The government’s infrastructure investment and development strategy should, among other things, focus on cost and efficiency in transport and ports systems for export-orientated industries, says Naamsa.

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“Cost and efficiency improvements in logistics costs would enhance the automotive industry’s international competitiveness and are two of the key pillars of the industry SA Automotive Masterplan 2021-2035, of which the objectives include to produce 1.4 million vehicles per annum by 2035, doubling of manufacturing employment and transformation of the industry value chain, among others,” it said.

Naamsa was responding to the announcement on Thursday by President Cyril Ramaphosa on South Africa's Economic Reconstruction and Recovery Plan.

Ramaphosa said the objectives of the plan are to create jobs, primarily through aggressive infrastructure investment and mass employment programmes to reindustrialise South Africa’s economy, accelerate economic reforms to unlock investment and growth, fight crime and corruption and improve the capability of the state.

One of several key interventions is a drive for industrial growth in the context of a steady decline of South Africa’s manufacturing base over many years, he said.

“To place our economy on a new trajectory, we are going to support a massive growth in local production and make South African exports much more competitive,” he said.

Ramaphosa said South Africa last year recorded its first trade surplus with the European Union, driven by record exports of manufactured goods, adding South Africa produced and exported more motor vehicles last year than in any previous year.

He said South Africa imports about R1.1 trillion worth of goods, excluding oil, each year and could add an estimated two percentage points to the country’s GDP if it were to manufacture just 10% of these goods locally.

If South Africa were to supply just 2% of the R2.9 trillion worth of manufactured goods the rest of Africa currently imports from outside the continent each year, it could add around 2.5% to the country’s annual GDP, he added.

Naamsa stressed that the infrastructure strategy should be a catalyst for growth in manufacturing production capacity, operations in the mining industry and all sectors that provide a higher return to GDP and employment.

The automotive industry is already the largest manufacturing sector in the South African economy, accounting for 27.6% of the country’s manufacturing output in 2019.

It exported vehicles and automotive components valued at a record R201.7 billion in 2019, which equates to 15.5% of South Africa’s total exports and contributed 6.9% to South Africa’s GDP.

However, Naamsa said the automotive industry is particularly concerned about the impact of grey imports, adding that about 300 000 of the 12.7 million vehicles on South Africa’s roads are illegally operated.

It said this could potentially result in the fiscus losing about R3.8 billion a year in taxes.

Naamsa said new vehicle sales are linked to the strength of the economy and year-to-date new vehicle sales have contracted by 33.4% or 132 878 units compared to the corresponding period last year because of the COVID-19 market contraction.

Econometrix chief economist, Azar Jammine, said the growth in passenger vehicle sales reacts to the rate of change in economic growth and is one of the most sensitive indicators of the momentum of the economy.

However, Jammine said the swing in growth this year has been so wild and negative that only a brave person would call an absolute positive year-on-year growth rate in passenger vehicle sales in the second half of this year in line with improved economic growth.

“The lagged effects of the devastation of the economy are too great to allow for a recovery to positive year-on-year growth in car sales until next year at the earliest,” he said.

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