Issue: Dec 2013


South Africa positioned as gateway to African market



by Ed Richardson


A CNC machine in operation at SAAW 2012


Delegates on a site tour for SAAW 2012
Situated geographically half-way between the Americas to the west and Asia to the east, South Africa is positioning itself as a base from which investors can access the ag¬gressively growing economies of the rest of Africa. Helping component suppliers and manufacturers wanting to enter the African market or to grow their market share is the South African Automotive Week, which is held bi-ennually, as an open and comprehensive showcase of the automotive supply chain’s capability at the tip of the continent.

It will next take place in October 2014 in Africa’s economic powerhouse, Johannesburg. The event has full industry support. It is endorsed by the Automotive Industry Development Centre (AIDC), National Association for Automotive Component and Allied Manufacturers (NAACAM), National Association of Automobile Assemblers of South Africa (NAAMSA), the dti (South African government) and other key stakeholders. “SAAW’s unique focus on component manufacturing differentiates it from any other event on the continent,” says Alfred da Costa, chair of the SAAW working group committee. “SAAW represents one of the most significant economic growth opportunities for the industry,” he says. “The South African government actively supports growth for the sector and trade through South African Automotive Week,” adds Mkhululi Mlota, Director Automotive Sector, Enterprise and Industry Development Division, South African Department of Trade and Industry (dti). The dti has set aside budget to subsidise travel costs of eligible international trade visitors,” he says.

Automotive Industries (AI) asked South African Automotive Week Director, Andrew Binning what the focus for 2014 will be.

Binning: We will use a combination of a tradeshow, conferences, networking, match-making and site tours, in order to attract more international delegations. The South African government will cover the travel costs of eligible delegates to visit the initiative and the industry and its associations are rolling out the red carpet to woo prospective investors and buyers.

AI: How does the South African auto industry rate in global terms?

Binning: While South Africa produced around 1% of global vehicle output, it exports components around the world. It is seen as a prime investment location for companies racing to reach the fresh African markets. Sixteen of the world’s 30 fastest growing economies are African, and while the growth is off a small base, the figures must be attractive to global manufacturers looking for new growth markets. South Africa is already exporting vehicles to Africa, and this volume is expected to grow. South Africa’s vehicle exports to Africa (now ranked the 2nd fastest growing continent) looks set to position it as a gateway for the world to African markets. Investors are being encouraged to consider South Africa by making a small start and attending South African Automotive Week, which will provide them with a comprehensive view of the opportunity and capabilities while showing them the wonders and beauty of the country. “Investors are being encouraged to consider South Africa by making a small start and attending South African Automotive Week, which will provide them with a comprehensive view of the opportunity and capabilities while showing them the wonders and beauty of the country.”

South Africa – the numbers According to KPMG Africa Automotive leader Gavin Maile South Africa exported 24,281 vehicles to Algeria in 2012, followed by Nigeria as second most popular export destination, at 14 874 units – this up from 7,151 units in 2010. Ghana exports grew from 2,451 units in 2010, to 5,062 units in 2012, with Angola importing 7,783 vehicles from South Africa in 2012, up from 934 in 2010. “These countries all have high gross domestic product growths,” Maile said at a KPMG briefing. “Africa is a real solution for South Africa’s vehicle exports.” Healthy export growth is largely attributed to the South African government’s new Automotive Production and Development Programme, which came into effect in January 2013, and which rewards volume production. KPMG believes imported passenger cars into South Africa may decrease from 72% of all local car sales in 2012, to 71% in 2013. This comes as the duty rate on imported vehicles has now stabilised at 25%. If it materialises, the fall in percentage of imported cars in the sales mix will be the first drop since 1994. In 1995 the import duty rate was 71% and the percentage of imported cars sold in South Africa stood at 9%. This 9% has steadily increased as the import duty rate has come down, hitting 32% of all car sales in 2001, 50% in 2005, 61% in 2007, and 69% in 2011. Overall vehicle production in South Africa is expected to increase by 21.3% or 654 300 units up from 539 424 units in 2012. About 390 000 vehicles were produced in South Africa in 1995....reflecting growth of 59% over 18 years. In 2012, Toyota was South Africa’s top exporter, at 88 122 units, followed by Volkswagen, at 54 148 units, and Mercedes-Benz, at 49 825 units. Outside of Africa, the top 2012 export destination for South African made vehicles was the US, at 66 220 units, followed by the UK, at 41 111 units, and Japan, at 17 226 units.

Opportunities in truck and bus markets Truck and bus assemblers and original equipment manufacturers based in South Africa are confident about the future of the industry. Speaking at the Johannesburg Truck & Bus Show held in October 2013 MAN chairman Geoff du Plessis said MAN’s strategy remains focused on using the South African infrastructure as the platform to supply products and services into Africa. Hino, which has been the top-selling truck and bus manufacturers in the Japanese domestic market for the past 40 years, is increasing its focus on the African market according to the executive vice-president responsible for Hino’s overseas operation, Koichi Ojima.

Addressing the media the Johannesburg Truck & Bus Show he said: “Hino sold a record 154 000 units globally in 2012, of which 42 000 were sold in Japan and the remainder in overseas markets. Our largest sales volume comes from South-East Asian markets, but we realize that countries on the African continent are growing in importance for vehicle manufacturers due to the booming economies and rapid GDP growth rate.” Chinese manufacturer FAW is building a commercial vehicle assembly facility in the Coega Industrial Development Zone, which is situated in the Eastern Cape province of South Africa and is served by two of Africa’s best performing ports.

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