Bumpy ride for motor firms

NEW MARKETS: Despite low growth in the economy, Volkswagen Group of South Africa exported more than 3000 vehicles last month. However, exports of new vehicles declined overall by 19.4% compared to February last year. Picture: EUGENE COETZEE
NEW MARKETS: Despite low growth in the economy, Volkswagen Group of South Africa exported more than 3000 vehicles last month. However, exports of new vehicles declined overall by 19.4% compared to February last year. Picture: EUGENE COETZEE

SLOW growth in South Africa’s economy will put new vehicle sales under pressure, Standard Bank macroeconomic analyst Shireen Darmalingam said yesterday.

Darmalingam was the guest speaker at an Eastern Cape Exporters Club discussion in Newton Park, Port Elizabeth, on economic trends that would influence South African exporters this year.

Darmalingam said South Africa was considered to be one of the fragile five economies in the world, with a large fiscal and current account deficit.

Standard Bank predicts gross domestic product (GDP) to grow by 2.2% this year and only 1.9% next year. This is because household consumption is under pressure, which makes up 67% of the country’s GDP.

“Consumers are not spending at the rate expected and we are all feeling the fuel increases and the Reserve Bank’s interest hike,” she said.

Many factors impacted on an economy, and new jobs were “only plugging the gap” of job losses which occurred during the recession.

“Inflation will remain above 6%, because of the high food and fuel prices. The high maize and wheat prices push up meat prices because it is also feed for chickens,” Darmalingam said.

She referred to South Africa’s vehicle sales which declined by 3.1% last month, and the National Association of Automobile Manufacturers’ prediction of slow growth in sales for this year.

With the subdued spending environment, on the back of the damaging strike in the automotive sector last year, low growth in vehicle sales was expected this year, Darmalingam said.

“The strike tainted the South African vehicle manufacturers’ reputation and we cannot guarantee that there will not be another strike this year.”

A three-year wage agreement between the Steel and Engineering Industries Federation and employers in the vehicle component and sub-component sectors expires in July, and some vehicle manufacturers had already started working on contingency plans to avoid last year’s losses because of possible industrial action.

The vehicle industry contributes 6% to South Africa’s GDP.

Darmalingam said despite the economic growth slowdown, exporters should take advantage of “pockets of strengths”, particularly in the growing African market.

Exports to Africa had since 2000 increased by 5% and it was the only region in the world where South Africa had a trade surplus. Exports are mostly to Zambia, Mozambique and Zimbabwe while SA also imports mineral products from mainly Nigeria and Angola.

Last month’s aggregate of 51814 units for new vehicle sales shows a decline of 1662 vehicles – or a fall of 3.1% – compared to the vehicles sold in February last year. Exports of new vehicles last month declined 19.4% to 21819 units compared to exports last year.

Naamsa attributed some of the low exports, to the absence of exports by Mercedes-Benz SA, which is retooling for the production of the new C-Class in East London.

  • The Eastern Cape Exporter of the Year competition is open for entries.

Exporters Club chairman Quintin Levey said yesterday June 9 was the closing date for entries. The winners would be announced at a gala function in August. – Cindy Preller

 

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