Published On: 21 Nov 2022Categories: Opinions


South African Auto Week

NAAMSA held their inaugural SAAW event at Kyalami which took place 25-28 October 2022. The event showcases the local motor industry and creates a valuable interface between all the stakeholders in the segment. This spans OEMs (Original Equipment Manufacturers), importers, ancillary industries and of course government.

At this first event there was a distinct undercurrent of quiet desperation and tension around the future in particular from the OEMs but it must be said extended to pretty much everyone I spoke to with varying degrees of alarm.

The motor industry has managed to move mountains in the past and this has been largely because of collaboration between government, the OEMs of which South Africa has 7 (Toyota /Ford /BMW /Isuzu /Mercedes Benz /Volkswagen /Nissan). These OEMs make complete cars from scratch using parts either sourced locally or imported and they sell cars locally as well as exporting them.

Both local sales and exports are equally important to the OEMs to ensure viability. One cannot exist without the other.

And we have been successful in the past because of policy and certainty around the industry that is in place. It is WHY the industry has grown and why we have such good returns from it as a country.

It is by far and away the biggest manufacturing segment in the economy and it accounts for just under 5% of total South African GDP. In economic terms it is important and we export over R200B annually representing vital income to the country. The OEMs employ over 30k people directly, 110k in the manufacturing sector and around 490k in the peripheral industries of sales, repairs and maintenance. I need not add any emphasis here.

So far it all looks good. Better than good actually. It is a genuine South Africa success story, one of meaningful substance.

And one out of every 20 working days government is of course devoted entirely to the industry as it’s share of government time in proportion to the contribution to GDP. It stands to reason that this is exactly what we should be doing. Taking this extraordinary success, building on it and creating more. Enabling. Nurturing. Shepherding. Whatever it is that good government is supposed to be doing in other words.

But there is a problem.

Past success has been bred from past policy certainty, past legislation and clear understandings of incentives, taxation and complex accounting for local content, job creation and of course BBBEE.

The past is the past however and the planning that put us in such good stead for current success is noticeably absent from the present.

Our future in motor manufacturing lies in NEVs – New Energy Vehicles. This is not anything new, or unknown, and we are already seeing part of this present itself in our market via the new EVs being sold. This trend is baked in the cake – it is a certainty.

The future of Internal Combustion Engines (ICE) which our policy ably supports is fading as predicted, and whilst we may still use ICE derived vehicles in South Africa for some time the export markets which constitute a foundation of business for our local OEMs will not.

This effectively means that come 2030 our OEMs will have to halve their production to provide vehicles to their existing markets that are still ICE friendly. ICE markets are not going to grow to take up the surplus production that we will still be making if we do not transition to NEVs.

There is no ideology or political ethos at play here. This is not a clinging to imperialist dogma or socialist betterment debate. Those have already happened. The result is that ICE is deader than heaven on a Saturday night and that NEVs are replacing them. End of.

If we insist on producing ICE, at the levels of production that can still be supported, the OEMs will simply not be viable and will slowly shut down as demand dwindles. Jobs will disappear over the next ten years and the economy will shrink.

Politicians will have a field day and will blame capitalism, communism, resource allocationism, and many things yet to be invented to apportion the blame to. Nothing of course, will be their fault. And as jobs die and are not replaced, as forex that is no longer earned slows feeding the fiscus the screaming from the politicians will become louder and louder. The blame game will be in town and it will be sold out.

How do we prevent this?

It is simple. But it is not easy. Politically there needs to be some demonstrable will that a motor manufacturing segment is indeed a wanted thing. I could write books about how such a question will not be answered but it won’t help.

What we need to do is to start to make world class NEVs to replace our ICE manufacturing and we need to sell those to our current export markets as well as locally. We need to transition from ICE to NEVs at whatever pace is appropriate and we carry on. Just as the rest of the world is already doing.

To accomplish this however will take a monumental shift in manufacturing techniques and equipment. Manufacturing of NEVs is not just a case of swapping engines.

This means new plants. New plants require investments of literally billions of dollars. They take years to design, plan, implement and commission. Think of anywhere between 4 to 8 years.

And yet current policy and legislative frameworks do not cater for NEVs. They simply don’t exist.

Without these in place, no OEM is going to commit the capital and resources required to deploy NEV production in South Africa. The money at stake is simply too high to ‘gamble’ on a bet and to ‘hope’ for an enabling environment to magically appear.

As one CEO pointed out, ‘Hope is not a strategy’.

We are at the mercy of government. And right now in South Africa, you’d be forgiven for taking the cynical stance that this being the case we might as well plan for the shutdown of the industry now and save ourselves the ‘hope’ that government is able to wake up and do their job before it is too late.

The world is now a different place to what it was twenty years ago when our auto manufacturers back then were laying the foundations for the successes that they are realising today. Today we have excess manufacturing capacity on a global front and if we do not crack the nod for making NEVs by the OEMs, someone else will.

Lest I be accused of doom and gloom, and it is all too easy to assign such to current government as it lurches and stumbles from one blunder to the next. But all is not yet quite lost. Whilst sadly we do need hope, that hope is based on the fact that we do have a world class auto industry. We have world class people working on the policy issues and despite the appearances that government is continuously putting forward of late for the seemingly express purposes of doing nothing and watching own goals being scored we actually do have people within government that understand what needs to happen.

The difficulty is that with a top down approach where we have ministries that don’t appear to co-ordinate with each other, and ministers that appear focussed on internal ANC matters as opposed to the day to day job requirements of their positions, the clear and present danger is that the dithering, the kicking the can down the road and the blissful ignorance in which our cabinet operates, the urgency of the message might be lost.

The simple fact of the matter is that South Africa is out of time. We are right up against the wall at the moment. I listened attentively to the speech delivered at SAAW by Ebrahim Patel and he doesn’t appear to be aware of what it is that needs to get done. His speech writers made a great attempt at conveying a sense of calm but it was what wasn’t said that spoke the loudest. The repeated message, from every CEO of every OEM was ignored, or perhaps even worse, simply not heard.

I didn’t see enough government representation at SAAW to gain a sense of whether the message is landing or not. If there is a bigger plan in place from government, it was not conveyed. The white paper is already a year late and that is only the first step to the creation of policy enactment into legislation and new industry agreements that encompass NEVs.

The tragic bottom line is that as much as the industry has been sending the message to government, it too is listening. The message that the OEMs are receiving is loud and clear.

They are already beginning to make their investments in this massive industry elsewhere and those decisions are being taken as we speak. Not in a year’s time. Not in six months time. Now.

Hence, unless there is urgent and meaningful commitment to new policy to incentivise, strategise and to encourage local development of NEVs, the current OEM manufacturers in South Africa are nothing more than cancer patients with limited lifespans left.

In just eight years at SAAW 2030 they will be sickly shadows of their current selves, and shortly after that the plug will be pulled and they will simply cease to be.

South Africa will doubtless not cease to be. South Africa will carry on. We will make the switch to become importers into our own market of the same world class quality cars that we should be exporting to the rest of the world.

We will of course be minus a hundred thousand jobs or so and minus all that lovely forex. One in every twenty rands of GDP will have gone poof. But we will not be short of the blame game with the current crop of incompetents comfortably retired on our taxpayer dime behind high walls, safely ensconced away from the impacts on the lack of decision making that has to be happening right here, right now.



William Kelly


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