Thought Leadership - The state of the South Africa Automotive industry

FEBRUARY 18, 2016

Automotive industry is one of the growing industries dominating in manufacturing nationally and globally. The Automotive Industry is the largest manufacturing sector in the SA economy and in 2014 the industry contributed approximately 7.2% of GDP.

In the State of the Nation Address (SONA) 2016 by President of the Republic of South Africa (SA) Mr Jacob Zuma, the president mentioned that - government incentives for the automotive sector have attracted investments of over twenty five billion rand over the last five years. The president’s comments echo SA’s position of a developed and established automotive sector base that has shown resilience and potential to compete globally.

The automotive industry participates in the construction of a socio economic environment fertile to innovation by creating social change and opportunities for a wide spectrum of the South African population.

The automotive sector provides a locus for stimulating the growth of manufacturing as well as achieving specific outcomes, such as employment creation and economic empowerment.

South Africa's automotive industry has steadily established itself as a global, engine for the manufacture and export of vehicles and components. SA is used by many major multinational firms to source components and assemble vehicles for the local and international markets.

Indications are that although the industry had a slow start in 2016 with lower than expected domestic sales and export recorded thus far, a substantial increase in new vehicle exports was expected to materialise from March, 2016 onwards. At this stage, industry projections for exports during 2016 showed an improvement of around 12% on the previous year.

The Coega Industrial Development Zone (IDZ) is the biggest industrial development zone in the country and is the main catalyst for socio-economic development as well as the gateway to global markets with two ports serving the logistic needs of investors.

The automotive sector is already one of the key sectors situated in the Coega IDZ. It is a highly strategic sector for the Eastern Cape Province and an important contributor to the economy of Nelson Mandela Bay.

At this point, about 35% of the SA automotive components industry is located in the NMB area. The catalysts are the presence of General Motors SA, Volkswagen (VW), the Ford Engine Plant and First Automotive Works (FAW) in NMB.

Many suppliers in the NMB are also key players in the component supply chain of Mercedes Benz SA in East London.    

Coega IDZ’s intention is to continue to grow and develop the automotive sector through attraction of investment in new and replacement models, as well as the manufacturing of automotive components. Coega remains confident that some of the OEMS currently exploring South African shores will expand operations and choose the Coega IDZ as a location to serve Africa and other export markets.

The CDC’s focus remains to increase plant production volumes, sustain employment and strengthen the automotive value chain within the Eastern Cape, considering that the Eastern Cape has a sound manufacturing base, primarily in the automotive sector. To maintain the competitiveness of the automotive industry in general, many factors have to be taken into consideration. As is the case for South African vehicle manufacturers, South African component companies involved in exports must be innovative if they are to maintain their positions in international supply chains, as global competition is fierce.

Up to now,South African component suppliers have been able to use their production flexibility as a decisive competitive advantage in penetrating global markets.

The Coega IDZ is the only IDZ in Southern Africa (possibly the rest of Africa) that has recorded yet another successful milestone by making history and signing 19 investors during the 2014/15 FY, the most ever in a financial year spelling a new era in a number of projects attributed to an IDZ in South Africa in one FY. In addition the CDC had 31 operational investors with a combined investment value of R6.44-billion as at 31 March 2015.; trained more than 8 147 (85 886 people since inception); created 14 765 direct employment (62 142 jobs since inception) and achieved R6, 44-billion in investment value for 31 Operational investors.

These achievements are encouraging; they give the CDC belief that the future is bright for the automotive industry within the Coega IDZ, Nelson Mandela Bay, Eastern Cape and South Africa at large.

Image: AUTO INDUSTRY: Gustav Meyer, Coega Development Corporation (CDC) senior manager – international markets (transport industry). Argues that SA’s position of a developed and established automotive sector base shows resilience and potential to compete globally.