South Africa’s supplier trade body has been called back to parliament to discuss its deep concerns surrounding local content production and currency fluctuation.
A meeting was convened last week of the trade and industry policy committee in Cape Town with six major South African industrialists, but two National Association of Automotive Component and Allied Manufacturers (Naacam) representatives at that original hearing have been recalled before parliament.
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“The hearing was for all manufacturing companies to talk about government industrial policy – it [hearing] was so intrigued by the motor industry, it asked them [representatives] to come back for a two-hour hearing this Thursday (11 March),” Naacam executive director Roger Pitot told just-auto.
“It is critical we have local content as we have very little – real content is between 35% and 40%. Everybody has an objective to get local content to between 60% and 70%, which would mean OEMs would buy 80% of parts locally.”
Pitot insisted unless that level was achieved in the long term, the “sustainability of the South African” model would be under question. To ship two thirds of parts to South Africa and then export half of vehicles “does not make sense”, he said.
As well as the local content issue, Pitot added the components industry was also being hit hard by the twin pressures of South Africa’s massively fluctuating interest rates which are currently running in double digits and the strong rand.
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By GlobalDataThis has had the effect of impacting Naacam members accessing new investment funding as well as securing working capital, he said.
Of equal importance is the strength of the rand which is severely impacting exports. “Our currency is the second most volatile in the world, fluctuating weekly by as much as 5%, which makes it really difficult,” added Pitot.
“This month it was ZAR10 to the euro and 18 months ago it was 14.” “Our exports have taken a real hammering – we are competing with other developing countries for export business.”
The significance of this can be seen by noting some 40% of South African component production is for export, with 70% of that going to Europe. Around 50% of Naacam members’ business is denominated in euros and 30% in dollars, so the problem is clear. “We call on government to address interest rates and the currency situation,” said Pitot.
The Naacam executive director specifically highlighted Thailand’s policy of creating incentives for its industry which is the largest production centre in the world for one-tonne pick-up trucks [known as bakkies in SA]. “We are going to give the Parliamentary committee some of that information about Thailand,” he said.
“The Japanese government spends US$300m training the automotive component companies,” he said. “We would like half of that. There is one programme already announced but it is US$3m – it is paltry.”
