Port logistics must be fixed and legal framework on EVs finalised
• With the AfCFTA kicking off, now more than ever vehicle makers have two imperatives
Each February, SA’s finance minister and a team of economists wrestle with the annual budget. That delicate balancing act — pun intended — is never simple, but as anyone reading this will be aware, a tough economy and one of the world’s most unequal societies make the task more complex.
This year is no exception: the Treasury ’ s most recent data gives the clearest indication yet that public finances are in poor shape, with the budget deficit widening from 5.7% in November to 6% in December. It ’ s the biggest deficit in more than two years.
That ’ s likely to increase pressure on finance minister Enoch Godongwana to rein in public spending in an election year — not an easy ask for any minister. Having undertaken to halt or substantially downscale bailouts for SA’s failing stateowned enterprises, Godongwana has now approved a package for a turnaround of the rail and port operations. Failing to do so would be likely to further hamstring exports, a crucial earner of forex and tax for the fiscus.
SA’s weak currency is a double-edged sword, hiking the costs of imports but benefiting the country’s exporters. In 2022 SA earned $135.74bn in exports, crucial revenue for the fiscus.
Vehicle manufacturing body Naamsa reports that since the implementation of the Motor Industry Development Programme in September 1995, SA’s automotive sector has grown to be the leader in the manufacturing sector. The value of vehicle exports from 1995 to 2022 totalled R1.5-trillion, while the export value of automotive components amounted to R893bn.
In 2022, the seven automotive original equipment manufacturers paid R14.689bn in taxes and duties to the fiscus, helping to fund crucial interventions to improve the lives of millions of South Africans.
It ’ s not all been a smooth ride: in recent years the global automotive industry has suffered gut-punches by the supply chain and semiconductor shortage crises, and Russia’s invasion of Ukraine.
The sector locally and globally is resilient. But, domestically, vehicle makers and the related supply chain face two pressing imperatives in 2024. First, the welldocumented problems with logistics must be ironed out. Delays at the Port of Durban alone have cost Transnet more than R160m. The World Bank ranks the performance of Cape Town ’ s port container operations at 344 out of 348 ports internationally.
As a first order of business, all stakeholders should be doing everything they can to end the crisis and prevent its recurrence. In its current state, our collapsed rail system costs the economy about R1bn day. Restoring its functionality would largely free exporters from fuel price fluctuations and deteriorating road infrastructure.
It is not just vehicle makers that are affected. Hortgro, the association for the deciduous fruit-growing sector, estimates that inefficiencies at the Port of Cape Town have cost the sector R2bn in the past two years.
The announcement earlier in February that Transnet plans to open up third-party access to the rail network from April is enormously encouraging. It’s emphatically and indisputably crucial to sort out our railways and ports and keep them that way. The 124-page “road map” to achieving that must be implemented urgently. The private sector and legislators must work together to ensure it succeeds.
Second, SA must finalise the legislative framework on electric vehicles (EVs). The publication of the 68-page white paper in December was a welcome step forward, and finalising the policy must be expedited so that SA can start building and exporting EVs in 2026. EVs are the biggest revolution in road transport in more than a century and will fundamentally alter the vehicle makers ’ world.
It comes at a time when new legislation stands to ease and expedite trade. Earlier in February, the first batch of locally produced goods to be exported under the African Continental Free Trade Area (AfCFTA) framework left Durban harbour, signalling the start of preferential trade as a single market on the continent. The AfCFTA creates the world’s largest free trade area by number of countries and has the potential to be a catalyst for the transformation and growth of African economies and businesses.
It aims to eliminate trade barriers, including tariffs, to boost intra-African trade, while growing value-added production and trade across all sectors, providing exporters with new opportunities to access markets. It’s hoped the framework will accelerate development of regional and local value chains, offering investors access to a population of more than 1.3-billion people, of whom more than 60% are under the age of 25, according to the World Economic Forum, and with a fast-growing continental GDP. In its full iteration the framework has the potential to enable the development of regional automotive hubs, as well as expediting exports into African markets.
SA is well placed to capitalise on that: we’re efficient and innovative, well integrated into the global supply chain and with a well-established export footprint in more than 150 markets. So it’s low-hanging fruit for us. The sooner we can start building EVs, the sooner the forex from exporting them can help bolster the fiscus and fund much-needed socioeconomic development. But the two obstacles outlined above must be addressed. Time is of the essence.
THE AFCFTA HAS THE POTENTIAL TO BE A CATALYST FOR THE TRANSFORMATION AND GROWTH OF AFRICAN ECONOMIES