R/€ = 15.26Change: -0.01
R/$ = 14.41Change: -0.03
Au 1057.95 $/ozChange: 0.07
Pt 835.50 $/ozChange: 0.00
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters About Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Feb 22, 2008

Components industry positive despite energy crisis

© Reuse this

This year should not see a marked difference in the automotive components industry despite the current energy crisis, says the National Association of Automotive Component and Allied Manufacturers (Naacam).

“The automotive market experienced a softening in the middle of 2007, and, at the same time, monthly car sales were lower in relation to figures for the same month the previous year. Commercial vehicles, however, did hold up and sales were better in 2007. This year again, the car market is going to be weaker, as interest rates rose. This has led the National

Association of Automobile Manufacturers of South Africa (Naamsa) to forecast that vehicle sales will be 10% down from last year,” Naacam executive director Roger Pitot says.

However, he points out that on the local component production side, exports are starting to show substantial growth. This comes after vehicle manufacturer Ford Motor Company of Southern Africa announced an investment of more than R1,5-billion in the local production of a new-generation pick-up, as well as the Puma diesel engine.

“The investment will take about two years to be implemented, but Naacam expects that other vehicle manufacturers will announce their own export programmes in the near future. This means that production numbers should remain unchanged for this year, but will increase substantially from next year,” Pitot says.

He comments that a weaker rand is benefiting the components export industry.

“Exports of component parts have been under pressure over the last year, because of a stronger rand. But with a sudden weakening of the currency, components producers find themselves 10% more competitive with overseas markets than they were a few months ago. While this type of volatility is difficult to manage, it gives the industry two advantages in that it creates a more competitive export market and helps local industry compete against cheaper imports,” Pitot explains.

The component industry currently has a turnover totalling about R50-billion, making it a 2% contributor to South Africa’s gross domestic product.

Meanwhile, South Africa is still under stress from large power outages. Pitot says that this is affecting the components manufacturing industry adversely.

“The first thing to understand is that the automotive components manufacturers comprise companies that span a vast range of sectors, such as the rubber, plastics, glass, and metals sectors. The risk lies in that if only one of the raw-product suppliers is disrupted by the current energy crisis, there could be a ripple effect affecting the vehicle manufacturing industries. The sooner a plan to remediate the situation is found, the better manufacturers can plan and overcome the problem,” Pitot states.

He says one of the ways in which the problem can be resolved is for government to assist manufacturing companies to invest in generators and back-up systems. This can be done either through partial funding of the investment, or allowing the companies to claim accelerated tax depreciation on the investment.

“Bigger companies may be able to afford back-up generators, but smaller companies, which are the lifeblood of the economy, and which government is trying to encourage, are the ones who can least afford it. That is why government needs to become involved and aid these companies,” Pitot explains.

Local companies have also started looking to the African continent for new markets, but Pitot is not convinced that the continent offers a quick solution.

“Africa remains a challenge. Naacam has found that most of its member companies that manu- facture components and do not want to sell directly into the continent, because of smaller volumes demand. This, coupled with the issues surrounding the logistics of getting the parts into Africa, means that they would rather work through trading companies, or through outlets. That is the way in which most business into the continent is done,” Pitot explains.

In a previous interview with Engineering News, (July 27–August 2 2007), Pitot said that black economic empowerment (BEE) was low in the components industry, owing to many manufacturers being multinational companies and unwilling to sell shares in their businesses. However, he says that the situation has substantially improved since then.

“Several Naacam members improved on their BEE scorecards through either attaining black owner-ship or by promoting black management. The companies also buy more parts locally, and are getting involved in local enterprise development,” Pitot says.

It is for this reason that Naacam has established a section 21 company, which is aimed at finding black-owned and black-managed companies on the fringes of the automotive industry that want to get involved in the automotive components supply chain.

“Naacam members will provide money, time and resources for these companies. The association concedes that this is a long-term plan, spanning about two to three years, but at the end of this time, these companies will be able to enter the full supply chain in the automotive industry,” Pitot concludes.

Meanwhile, Naamsa and Response Group Trendline report that the industry’s potential in creating work and business opportunities can be ascribed to many kinds of basic manufacturing activities, including steel and aluminium production, rubber, textiles, plastics, the petrochemicals industries, and components fabrication. Because the industry also provides employment by proxy in many other areas, such as customs, tax and other national government departments, licensing, logistics, and other private-sector services, the industry’s influence is considerable.

The component supplier industry’s investment in plant and equipment in 2006 amounted to R3-billion, which was an increase of 30% on 2005’s figures. With the announcement of investment incentives for South African automotive producers, the component manufacturing industry is expected to increase capital expenditure substantially in the next few years.

Locally assembled vehicles and manufactured automotive components were exported to over 100 countries in 2006. Overall, Europe remains the automotive industry’s main trading partner, followed by Japan, the US, the UK and Australia.

The European Union accounts for almost 70% of component exports in terms of value, while the US, Japan and Australia are the top three destinations for passenger cars. Germany, Spain, the UK, the US, France, and sub-Saharan Africa are the leading destinations for automotive components.

Collective employment in the vehicle manufacturing industry currently amounts to more than 38 500 persons, while employment in the components manufacturing industry is about 78 000 employees. The total employment in the trade area, such as vehicle sales, maintenance, and replacement parts, currently amounts to about 198 000 persons.

Edited by: Laura Tyrer
© Reuse this Comment Guidelines (150 word limit)
Other Transport & Logistics News
French conglomerate Bollore may have to halt work on the Niger to Benin section of its giant West Africa rail project after a rival company won a court order to stop it going ahead. The dispute concerns rival rail schemes in the area.
The South African National Roads Agency Limited (Sanral) applied for leave to appeal on Friday against the Western Cape High Court judgment that set aside the approvals that would enable it to toll sections of the N1 and N2 freeways in Cape Town. This prompted the...
In its opinion outstanding e-toll bills are related to an unjust and irrational law which makes it unnecessary for businesses to be concerned about the amount they owe or to disclose it as a debt to shareholders, the Opposition to Urban Tolling Alliance (Outa) said...
Latest News
French conglomerate Bollore may have to halt work on the Niger to Benin section of its giant West Africa rail project after a rival company won a court order to stop it going ahead. The dispute concerns rival rail schemes in the area.
A week ahead of the second annual gathering of the Forum on China–Africa Cooperation (Focac), in Johannesburg, the JSE is rolling out the proverbial red carpet for Chinese investors looking to Africa’s largest bourse for possible investment opportunities, calling...
The South African National Roads Agency Limited (Sanral) applied for leave to appeal on Friday against the Western Cape High Court judgment that set aside the approvals that would enable it to toll sections of the N1 and N2 freeways in Cape Town. This prompted the...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
NICK CHRISTODOULOU As about 58% of data stored by organisations is dark, they must identify this dark data to expose risks and valuable information
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
BRIAN VERWEY Effective management, review and administration of non-core elements can improve business operations and increase revenue and decrease unforeseen risks
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...
Alert Close
Embed Code Close
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96