Unrest puts brakes on vehicle sales
Fitch revises its outlook for sector
No sooner had Fitch Solutions painted a rosy picture of South Africa’s vehicle production sector was the entity forced to revise its outlook following a spade of anarchy and criminality that accompanied the socalled “Free Zuma” unrests in in Gauteng and Kwazulu-natal.
The entity, which is affiliated with Fitch Ratings, last week released a forecast report showing SA vehicle production will see a robust recovery this year as demand for new vehicles in the country and its key export markets rebound.
It further said South Africa’s vehicle output will expand by 32.2% year on year in 2021, up from a 29.2% contraction last year. However, Fitch on Thursday said that violent protests last week risk derailing the improved outlook for the country’s vehicle production industry due to risks posed to critical supply chains, including damage to port, road and rail infrastructure, factories, fleets and personnel.
“In the province of Kwazulu-natal, there are several large automotive producers including Toyota, Volvo, Man Trucks and Mahindra, and we highlight that the Durban port in Kwazulu-natal is an integral part of the country’s autos supply chain,” said Fitch in its latest report.
“Above this, we note that there have been several instances in which protesters targeted trucks carrying new vehicles and vehicle dealerships.
“This will likely lead to automakers delaying their vehicle shipments until there is more security to safeguard the vehicles in transit, which will slow vehicle exports and imports.”
The entity also warned that if the protests escalate, truck makers will likely see the greatest loss to revenue as demand for new trucks is currently robust amid a growing need for fleet expansions.
According to data from Statistics South Africa, Gauteng contributed 34% to the country’s gross domestic product (GDP) in 2019, by far the largest contributor, followed by Kwazulu-natal at 16% and Western Cape at 14%.
This means Gauteng is the largest economy, having contributed R34 for every R100 of national economic production with Kwazulu-natal contributing R16.
The automotive industry’s contribution to South Africa’s GDP in 2019 stood at 6.4%.
The unrest came as new vehicle sales in June showed a sector on a strong rebound. June sales registered 38 030 new vehicles compared to the 38 320 in the previous month.