Billy Tom, president of motor industry umbrella body Naamsa, says it would be devastating for the industry if South Africa was kicked out of the Africa Growth & Opportunity Act (Agoa).
“Exports to the US from South Africa increased 498% from the inception of Agoa in 2001 to 2023. It’s our third-largest export destination with auto exports amounting to R24.1bn in 2023. Over and above the impact on individual auto manufacturers, it would be devastating for suppliers if these manufacturers could no longer export to the US,” says Tom.
Hundreds of suppliers would go out of business with dire consequences for the industry and the economy, says Tom, CEO of Isuzu Motors South Africa — the Gqeberha-based arm of the Japanese manufacturer — which assembles trucks and the D-Max bakkie for local and export markets.
Agoa has created 85,000 direct and 426,000 indirect jobs in South Africa, he says.
But with the Republican Party of president-elect Donald Trump full of people who want South Africa booted from Agoa because of its cosy relationship with Russia, Iran and China, and its hostile attitude to Israel, the loss of our privileged trade access to the US is a distinct possibility.
Would it put South Africa’s auto manufacturing industry on the line?
“It’s highly dependent on exports. For every three vehicles we manufacture two are exported. Without exports we don't have a viable industry. Without our third-biggest market, the US, we're considerably less viable,” says Tom.
Might the parent companies of BMW and Mercedes-Benz, which he says would be hardest hit, close their South African operations if they could no longer export to the US?
“It's not for me to say, but common sense dictates they might have to reconsider South Africa as a manufacturer of their cars if it were to happen.”
Would the local industry survive without two of its biggest players?
“It would certainly impact the industry because it's an ecosystem.”
Tom says strengthening the industry would require boosting trade with other auto hubs in Africa, “signing bilaterals with the likes of Egypt and Morocco to export light commercial vehicles to them and import passenger vehicles from them”.
For every three vehicles we manufacture two are exported. Without exports we don't have a viable industry.
— Billy Tom, Naamsa president
He concedes this wouldn't come anywhere close to compensating for the loss of Agoa.
Being part of Agoa is one of the biggest reasons multinational auto manufacturers continue to have operations in South Africa, he says.
“There's no doubt that without Agoa their mother countries have far less reason to keep them in South Africa. The loss of Agoa would certainly weaken the case for maintaining their operations here.”
Another major threat to South Africa's auto manufacturing sector is the looming UK and EU ban on the sale of new fuel-propelled vehicles from 2030 and 2035. “As a country, we've moved very slowly in terms of legislating for electric vehicles [EVs]," says Tom.
In October, industry representatives met President Cyril Ramaphosa, who committed to incentivising the production of EVs. Little has come of previous such commitments but Tom says with the GNU he's “a lot more optimistic” than he was a year ago. “Having [trade, industry & competition] minister Parks Tau as well as his deputies, I think we'll be moving a lot faster.”
The jury's still out “whether we've left it too late, but I think we're in a much better space than a year ago”.
Tom thinks the government has finally got the message that the threat of an EU and UK ban on new fuel-propelled vehicles from South Africa starting in 2030 is for real. “From where I'm sitting, there's a lot more urgency now than we've had before.”
Since 1995, South Africa has exported R1.7-trillion worth of vehicles, “so auto exports have been a huge forex spinner for the country”, says Tom.
“If we were to lose a large part of that it would destroy much of what we've done to build this sector. You can already see challenging signs”, he adds, citing a 22.8% drop in export volumes last year from the year before. This is the result of “economic issues” in export markets, such as competition from cheaper exports, increasingly EVs, from China, “but also the stricter new emission rules we're already feeling in our EU and UK export markets”.
It has given Naamsa a worrying taste of what will happen in five years “if we get to the date of the export ban and we're not ready”. Breaking into EV markets that are growing apace while the South African government takes its time won't be easy, Tom admits. “If you look at what's been happening in the overseas markets, it's not going to be plain sailing, we're going to be challenged.”
Meanwhile, the widening of public-private partnerships gives him confidence that the business environment, which has been so hostile for the sector in terms of load-shedding and the logistics network, is improving.
“We haven't had load-shedding since March last year, and that's because of the private sector. As Naamsa, we've signed an MOU with Transnet. Now we need to start finding, and executing, solutions with them that will help us. The sooner we can fix the ports and rail infrastructure, the more competitive the auto industry will be.”
The new Transnet management is “more receptive and collaborative” than before, and in Barbara Creecy, whom Naamsa met with recently, the industry finally has a transport minister with a plan for “getting Transnet sorted, which is very pragmatic, very clear, very simple and easy to action”.
But there's no time to be lost, says Tom. The government needs to do far more, far more quickly to create an environment that enables sectors like his to be globally competitive and grow the economy. “We need to prioritise economic growth above everything else. The level of unemployment keeps me awake at night.
“That's why I'm doing everything I can to convince Japan to give me more investment. Everybody is doing this with their parent companies. That's what will grow this country, but we must be able to talk a good story.”
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