Naamsa suspends new-vehicle sales projections amid political flux

21st April 2017

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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The National Association of Automobile Manufacturers of South Africa (Naamsa) will, for the time being, suspend all new-vehicle sales projections, in light of recent political events.

President Jacob Zuma at the end of March fired Finance Minister Pravin Gordhan, as well as his deputy, Mcebisi Jonas, as part of a number of changes made to Cabinet.

Naamsa says that the executive reshuffle could have “far-reaching consequences” for the South African economy.

Short-term consequences include a substantial dent in business confidence, as well as foreign and domestic investment sentiment.

The likelihood of rand weakness, rising inflation, upward pressure on interest rates, lower private investment spending, higher government debt servicing costs and lower tax revenue will contribute to lower economic and job growth, says Naamsa.

S&P’s took immediate action on the Cabinet reshuffle and downgraded the country’s investment rating to junk status.

Should other ratings agencies follow, the South African economy may experience an “immediate sharp recession”, which, based on the experience of other countries, is likely to persist for at least “two to three years”.

Naamsa says the international and domestic investment community regards political stability, continuity of policy and fiscal discipline as key requirements in the fight to avoid a credit downgrade.

Failure to act in accordance with these imperatives is “likely to cost South Africa dearly”.

The association notes that the performance of the South African automotive industry is closely linked to the overall performance of the country’s economy, with the key performance factors influencing new-vehicle sales being economic growth, interest rates and the exchange rate.

Therefore, Naamsa will suspend – “for the time being” – all domestic vehicle sales projections.

“Once the situation and conditions have settled down and greater clarity is forthcoming as to the impact of political events on the direction of the economy, the association will resume offering guidance on expected new-vehicle sales trends.”

Naamsa notes, however, that current economic scenarios suggest lower new-vehicle sales in the short to medium term.

March Sales
March new-vehicle sales increased by 2.1% to 48 534 units, compared with the same month last year.

The new-passenger-car market improved by 2.1% to 31 034 units.

March sales of new bakkies, minibuses and vans, at 14 882 units, gained 1.1%, while sales of medium trucks at 833 units, increased by 11.2%.

Sales of new heavy-trucks and buses jumped 7.4% to 1 785 units.

New-vehicle exports from South Africa gained 7.8% in March, to reach 29 879 units.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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