By Jessie Taylor
The automotive industry is currently a significant contributor to the South African economy and has long been used as a measure of the country’s economic performance. Not only does it support 110 000 jobs across various manufacturers, but it indirectly supports 1.5 million people through its wide network of suppliers.
Keeping the economy on course
The South African automotive industry is one of South Africa’s largest economic sectors by revenue, contributing 4.3% to the country’s GDP. The industry accounts for more than 17% of the country’s manufacturing output.
The automotive sector is a key gauge of economic performance, and a close correlation exists between domestic new vehicle sales and the economy’s overall performance. This was evident in the new vehicle market’s robust recovery after the pandemic when it showed growth of 22,2% to 464 493 units.
The sector relies on a network of thousands of companies that supply supplying parts, components, and materials, as well as a retail and vehicle maintenance network of dealers. According to The Automotive Business Council (Naamsa), “no other industry in South Africa has such an expansive reach across the country, delivering economic benefits and creating jobs in so many different sectors”.
Employment in the automotive sector
- 110 000 people are employed by Original Equipment Manufacturers building cars and bakkies, together with their suppliers and dealers.
- The industry’s multiplier effect sees it is responsible for more than 500 000 jobs across the formal sector
Automotive industry exports
- The 5th largest exporting sector
- The sector accounts for 18% of South Africa’s total exports
- The automotive industry exports to 152 countries
- 298 020 vehicles were exported in 2021
- Automotive component exports were valued at R69 billion in 2021
Driving transformation through localisation
Localisation – increasing the number of components assembled and manufactured in South Africa – could offer a significant opportunity to facilitate transformation in the automotive sector and facilitate the entry of BEE participants to its supply chain.
To meet the objectives set out in the South African Automotive Masterplan 2021 – 2035, the South African automotive industry must create 485 new businesses in Tier 2 automotive products. Of those, 50% need to be locally owned and black-owned.
South Africa contributes 0.7% of the global automotive manufacturing industry value.
South African Automotive Masterplan in a nutshell:
- Double automotive employment in the supply chain
- Grow the automotive industry from 600 000 to 1.4 million vehicles a year in production
- Increase local content in South African assembled vehicles from around 37% to 60% by 2035.
- South African vehicle production to 1% of global production by 2035
The future of the automotive industry
The auto industry is undergoing rapid technological changes, with automation increasing and the manufacturing side of the industry moving towards producing components for electric vehicles. The industry is made up of seven main companies that make up the automotive assembly sector in South Africa. There are more than 400 other companies that manufacture automotive components.
The automotive manufacturing sector has significantly increased capital expenditure over the last 15 years, spending more than R9 billion in 2020. Most of this spending was put towards automation, production machinery and plant equipment. This was accompanied by widespread workplace restructuring.
The auto industry faces challenges in terms of black ownership, with all seven of South Africa’s major motor manufacturers being foreign-owned.
This has required the industry to rely heavily on the Equity Equivalent Investment programme, which allows foreign companies to generate points in lieu of a direct sale of equity. This programme has seen the creation of the R6 billion Industry Transformation Fund, which establishes local component suppliers in the motor manufacturing supply chain. This fund has led to increased local production, black ownership and job creation.
Transformation in management control is also improving in the industry, with around 11% of the sector having black CEOs.
The sector still finds it challenging to implement gender equity, but there has been an increase in women taking up roles shop-floor rather than in clerical positions.
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