Focus on downgrade effects
IT IS far too early to make gloomy predictions about the future of the local motor industry in the wake of SA’s credit downgrade, according to Mike Whitfield, president of the National Association of Automobile Manufacturers of SA (Naamsa).
“Volatility comes with being an emerging economy,” he said. “Multinational investors know this and deal with it.”
Whitfield’s comments came after Craig Parker, African mobility specialist at international business consultancy Frost & Sullivan, suggested on Friday that the downgrade could have serious consequences for the local motor industry by hurting investor confidence, raising interest rates, weakening the rand and reducing disposable income.
“Major effects … will be felt through the entire value chain of automotive production,” he said.
Trade and Industry Minister Rob Davies told a conference last week that one of the aims of future motor industry policy would be to raise local content in vehicles made in SA from 38% to at least 60%.
But Parker cautioned: “Credit downgrades make it increasingly difficult to attract the necessary investment into the country to transform the industry and allow for greater local contribution into the local value chain.”
All of SA’s seven major vehicle manufacturers and many local components suppliers are foreign owned. All would be hurt by rand-related higher import costs but multinational parents of components firms would be particularly loath to invest further in SA, Parker said.
There was also a threat to labour stability, and demands for higher wages were likely.
However, Whitfield, who is also managing director of Nissan SA, said the three-year industry wage agreement reached in 2016 allowed for rising inflation. — TMG