The South African automotive industry consists of a wide range of companies and organisations involved in the design, development, manufacturing, marketing, importation, exportation and selling of motor vehicles. It is one of the country’s largest economic sectors by revenue as it contributes 6.4% to the country’s GDP [4.0% manufacturing and 2.4% retail]. The industry accounts for 27.6% of the country’s manufacturing output. We are the country’s 5th largest exporting sector out of all 104 sectors and accounts 15.5% of total exports. A record 271 288 vehicles worth a record R121,2 billion, along with a record R54,5 billion in automotive components, were exported to 147 countries in 2020.
The Original Equipment Manufacturers building cars and bakkies, together with their suppliers and dealers, generate significant revenue for the SA economy and employs more than 112,500 people across its various tiers of activity [from component manufacturing to vehicle assembly]. Combined with the industry’s strong multiplier effect, the auto industry is responsible for more than half a million jobs across the SA economy’s formal sector.
Auto manufacturing depends on thousands of companies supplying parts, components, and materials, as well as a vast retail and vehicle maintenance network of dealers. No other industry in South Africa has such an expansive reach across the country, delivering economic benefits and creating jobs in so many different sectors. With its linkages throughout the economy, the country’s automotive industry is a turbo-charged engine for the manufacture and export of vehicles and automotive components to world markets. In South Africa, the automotive industry continues to reflect the power of combining good industrial policy and foreign investment and is not only the backbone of the industrialisation drive in South Africa but is also key to ensuring greater economic growth.
The global pandemic rocked the world to its very foundations, and ultimately there are no easy solutions to reigniting COVID-19 affected economies, with South Africa no exception to this. The economic scars of the crisis are profound, and the South African economy experienced its deepest economic contraction in a century, with the country’s GDP slumping to -7,0% in 2020 as the COVID-19 global pandemic exacerbated the economic recession in the country. The Rand weakened in 2020 against major currencies, along with other risky assets, due to the impact of COVID-19 but recovered during the latter part of the year. The South African Reserve Bank (SARB) lowered the repo rate by a cumulative 300 basis points in 2020 to a near 50-year low to provide relief to indebted consumers and businesses as they navigate the economic shock of the COVID-19 pandemic.
South Africa’s future prospects depend on the development of a strong, knowledge-based, export-led economy. Encouraging news is that the world economy is projected to recover in 2021, while it is also expected that South Africa’s economic growth rate will rebound in 2021, setting the stage for a robust recovery from the very low base in 2020. Manufacturing is one of the sectors that can best assist in growing South Africa’s economy, and therefore, the growth of the manufacturing sector needs to be accelerated. A dynamic manufacturing base increases the economic multiplier in an economy and helps to expand the technological base, creating many more service-sector jobs. The automotive industry is not only the largest manufacturing sector in the South African economy, but it also invests billions of Rand every year, and represents about 460 000 highly skilled, direct jobs in its formal sector supply chain. The domestic automotive sector has proved to be a reliable partner and dependable ally for government to position manufacturing as a catalyst for the development and inclusive growth in the country.