An analysis by the Catalytic Converter Interest Group (CCIG) indicated that, over the last 12 months, the industry has lost new business contracts with a combined revenue of R7,9-billion, says CCIG chairperson and Johnson Matthey South Africa commercial manager Paul Thompson.

“We fear further business losses in the coming months.”

This fear stems from what Thompson terms the “continuing delays in the formulation, finalisation and announcement of industrial policy”.

However, having said that, he notes that there has been some “meaningful progress” from government in addressing the needs of the automotive catalytic converter industry, especially under the Automotive Production and Development Programme (APDP), set to be introduced in 2013.

The APDP is to replace government's current Motor Industry Development Programme (MIDP).

“In very broad terms, the APDP, as announced in September 2008, would have provided a level of support to the auto catalyst industry of around 25% of that available under MIDP in 2009,” explains Thompson.

“This would have lead to the demise of our industry in South Africa.

“Since that time, proposals for revised provisions for vulnerable industries within the APDP framework have been developed by the joint Department of Trade and Industry (DTI)/auto industry task group which would, if approved, have the effect of increasing the level of support to around 45% to 55% of the 2009 MIDP level.”

While this represents meaningful progress, notes Thompson, it still leaves the  support available to the catalytic converter industry at a level which will not sustain it beyond 2012.

“Of further concern to us is that we have been lead to believe that no further dialogue between the DTI Automotive Desk and industry on the topic of the APDP is planned, and that the matter will now be internalised within government for consideration and inclusion in the industrial policy action plan to be presented in January of next year.”

Thompson says the industry requires sufficient support measures that will not just sustain what it has already built up, but allow for further expansion.

He adds that South Africa is still viewed as a strategic location for catalytic converter production. However, he believes that factors such as the lack of clarity with regard to the country's industrial policy beyond 2012; South Africa’s geographic dislocation, with 95% of catalytic converters going to distant Western European markets; a global production capacity surplus; and increased competition from emerging markets such as Eastern Europe, China and India, are making it difficult for purchasing teams to see South Africa as a place to continue doing business with.

Catalytic converters are South Africa's biggest automotive component export segment, with the country currently supplying an estimated 11% of world production.

Catalytic converters are used in the exhaust systems of vehicles to reduce harmful emissions. The industry beneficiates South Africa's abundant platinum group-metals resource.

Apart form policy uncertainty, Thompson says the industry is also battling the current recession, which has seen employment in the local industry reduce by 1 386 people, or 26,8%, since the first quarter of last year.

“Export volumes thus far are 42% below the level at the same point during 2008, but could have been even lower was it not for the various foreign governmental incentive/scrappage schemes that played out in the main export destinations.”

Countries such as Germany, for example, offered consumers financial incentives to exchange their old vehicles for new ones.

“We are expecting second half sales of around 5,6-million units. This means that 2009 sales – forecast at 9,5-million – will be 45% below the peak in 2006, and 29% below 2008 levels,” says Thompson.

CCIG represents the interests of the South African catalytic converter manufacturing industry.

The DTI was not immediately available for comment.