Motor industry cuts trade deficit in 2014
Executives believe local content should exceed 70%
ASURGE of 13% in exports helped the South African motor industry slash its trade deficit by more than one-third last year.
The deficit – the value gap between exports and imports – fell from R24-billion in 2013 to R15.8-billion.
Having breached the R100-billion export barrier for the first time in 2013‚ at R102.7-billion‚ the industry shipped out R115.7-billion in vehicles and components last year.
A market recovery in the European Union‚ the local industry’s biggest trading partner‚ was a major stimulus for growth.
Imports also grew but only at 3.8%‚ from R126.7-billion to R131.5-billion.
But it’s too early to crack open the champagne. Since the automotive production and development programme (APDP) replaced the motor industry development programme in 2013‚ a new Treasury formula for assessing trade values has slashed the deficit.
Among changes‚ South African sales to Namibia‚ Botswana‚ Swaziland and Lesotho are now considered exports. Previously‚ they were local because they are part of a customs union with SA.
Under the old system‚ which also included after-market spare parts as imports‚ the 2013 figure would have been a record R63.8-billion‚ reducing to R59.7- billion last year. Nico Vermeulen‚ director of the National Association of Automobile Manufacturers of SA‚ says performance in 2013-2014 was “an aberration‚ a distortion”.
Prolonged strikes in both years slashed export earnings and encouraged imports to make up for local market shortages.
Nigeria and Algeria‚ SA’s leading African markets‚ imposed new controls on manufactured goods imports.
Lower international oil prices also influenced the ability of some oil producers to import goods.
Ford SA managing director Jeff Nemeth said shipments of some Nigeria-bound Ford Ranger pick-ups‚ built at his company’s assembly plant outside Pretoria‚ had been postponed as a result of lowerthan-expected oil revenue.
The 2013-14 period also included a prolonged shutdown by one of SA’s biggest exporters‚ Mercedes-Benz SA‚ while it changed over to a new C-Class model.
Since the middle of last year‚ when MBSA’s East London plant returned to its full production capacity‚ total annual industry export growth “has been running at more than 20%”‚ says Vermeulen.
After exporting almost 280 000 vehicles in both 2013 and 2014‚ the figure is expected to grow to 320 000 this year and 350 000 next year. SA enjoyed a trade surplus in built-up vehicles last year.
More than half the cars and commercial vehicles built in SA are exported and in 2013‚ exports amounted to R70-billion‚ against imports of R57.2-billion – a surplus of R12.8-billion.
Components remained in the red: R74.3-billion of imports and R45.7-billion of exports‚ for a R28.6-billion deficit.
One of the APDP’s cornerstones is increased local content in SA-built vehicles‚ and reduced reliance on imported components.
Many industry executives believe average industry local content should be more than 70%‚ rather than the sub-50% level‚ where it sits now. The government is set to announce the results of an APDP review and the industry hopes it will include ways to deepen local content.
“Policy is not a light switch that changes something instantly. All it can do is encourage you to move in a direction‚” Vermeulen says.
South African vehicles and parts are exported to 263 countries. The biggest single market remains Germany‚ which swallowed R21.7-billion of SA’s automotive exports last year. — BDlive
Policy is not a light switch that changes something instantly