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Thanks to the APDP, South Africa’s automotive industry last year generated a trade surplus for the third year in succession – but how accurate is the figure if it doesn’t take into consideration the value of replacement parts? David Furlonger reports
The English expression, to “go spare,” means to become angry. I wonder if South Africa’s hard-working motor industry executives are going spare?
The 2018 edition of the SA Automotive Export Manual shows that in activities generated by the 2013-2020 Automotive Production and Development Programme (APDP), the local motor industry in 2017 generated a trade surplus for the third year in a row. The value of exports exceeded that of imports by R10,3-billion.
But don’t start cheering yet since, say some, that’s not a real surplus. The APDP is all about assembly line activity – manufacturing vehicles and the components that go into them. It’s not concerned with replacement parts; the ones you find in your car dealership or local parts store.
However, some economists say that the official trade figure must include all automotive import and export transactions. Last year South Africa imported R53,8-billion worth of spare parts, thus turning the R10,3-billion APDP surplus into a R43,5-billion industry deficit.
It’s an ongoing argument about which figure presents the true picture. Naturally, motor companies and their suppliers want to be judged on APDP performance. For now, they are losing the argument. So they could be excused for going spare.
As it happens, neither figure is encouraging. The R43,5-billion deficit is more than 30% worse than the R32,9-billion of a year earlier. The R10,3-billion surplus fell more than 50%, from R23,2-billion.
There were mitigating circumstances. A strengthening rand in the second half of 2017 cut local currency earnings. For example, exports to the European Union – South Africa’s biggest regional market – grew 8% in euros but fell in rands.
Then there was the failure to set a predicted annual record for vehicle exports. Volkswagen SA, one of the local industry’s biggest exporters, virtually halted production for the last two months of the year to prepare for the launch of new Polos and Vivos early in 2018. So instead of breaching the 2016 record of 344 821 vehicles, the industry shipped out 338 093.
The manual is published by the Automotive Industry Export Council and compiled by Norman Lamprecht, executive manager of the National Association of Automobile Manufacturers of SA (Naamsa). He believes that, with sales in the first four months of 2018 1,4% ahead of the same stage last year, the industry could be looking at 366 000 units for the full year.
That’s just the starting point of where the sector wants to be. South Africa ranked 22nd among world motor industries last year, after building 601 178 vehicles for a 0,62% share of the global market. The ambition, by 2035, is to reach 1,4-million and 1%.
Why 2035? That’s the end-point for the next phase of policy after the APDP. Exports will have to provide much of the oomph to get to 1,4-million units. The rest of Africa will be key. Lamprecht talks of Cape to Cairo, but most local companies are concentrating on the sub-Saharan region.
Nissan SA’s managing director, Mike Whitfield, says that, long-term, the region should be the priority for all South Africa-based producers. But how long-term? Of the more than 300 000 new vehicles exported from the country in 2017, only 21 848 units went to the rest of Africa – a 72% fall from four years earlier, when the number was 78 807.
Of last year’s total, more than half went to South Africa’s neighbours in the Southern African Development Community.
While no one doubts African markets will bounce back to previous levels, and eventually exceed them, industrial strategy requires consistency of demand. If Africa is to become the basis of exports, endless wild swings will be a planning nightmare.
So, if Africa is still a small export destination, which countries are bigger? Germany is both the largest export market and trading partner. Last year, South Africa exported R46,7-billion worth of vehicles and components to the country. Next came the US (R18,8-billion), then Belgium (R13,9-billion), Japan (R8,9-billion) and the UK (R8,5-billion).
The UK, coincidentally, was the single biggest destination for South African-made vehicles: 98 358 of them.
Overall automotive trade with Germany was worth R116,1-billion, followed by the US (R29,8-billion), Japan (R29,0-billion), Thailand (R20,9-billion), UK (R15,7-billion) and China (R15,3-billion).
Predictably, Germany also provided South Africa’s biggest automotive trade deficit: R22,6-billion. Less predictably, Thailand was next, at R16,5-billion. It says much for how far the local motor industry still has to go to become truly world-class. Last year it imported R18,8-billion worth of goods, mainly components, from one of its main competitors for global business. In exchange, it exported only R2,2-billion worth. There’s a lesson there.