Photo by: Duane Daws
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 last week fired Finance Minister Pravin Gordhan, as well as his deputy, Mcebisi Jonas, as part of a number of changes made to Cabinet.
Naamsa said in a statement issued on Monday that the executive reshuffle could have “far-reaching consequences” for the South African economy.
Short-term consequences included 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 would combine to contribute to lower economic and job growth, said Naamsa.
“Over the medium term, the likelihood of credit ratings downgrades has risen substantially.”
Should this happen, the South African economy would experience an “immediate sharp recession”, which, based on the experience of other countries, was likely to persist for at least “for two to three years”.
Naamsa said the international and domestic investment community regarded 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 was “likely to cost South Africa dearly”.
The association noted that the performance of the South African automotive industry was 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 would 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 noted, however, that current economic scenarios suggested lower new-vehicle sales in the short to medium term.
March Sales
March new-vehicle sales increased by 2.1%, to 48 534 units, from 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.