Finance minister Trevor Manuel outlined in his budget speech on Wednesday a multimillion-rand plan to assist the country’s struggling motor industry.
Treasury has allocated R870-million to the motor industry in the form of production subsidies over the next three years under the new automotive production and development plan (APDP), which was announced in September 2008.
This plan replaces the motor industry development plan (MIDP) and is aimed at facilitating growth, increasing production, creating employment and encouraging investment in the local motor vehicle industry over time.
It is also hoped that the APDP framework will help to achieve government’s objective of doubling vehicle production in South Africa from the current level of 500 000 units to 1,2 million units annually by 2020.
The National Association of Automobile Manufacturers of South Africa (Naamsa) on Wednesday said it welcomed the R870-million allocated to the APDP. It said the automotive sector would continue to engage with government to “formulate a strategic response to the crisis facing the automotive industry”.
Last week, the South African motor industry approached the government for loans to combat job losses and declining growth and sales.
President of the National Association of Automobile Component Manufacturers Stewart Jennings said component producers would need at least R10-billion over the next 18 months to stay afloat.
Jennings said that while the R870-million budget allocation would assist the industry greatly, it will “not be enough as the components, dealers and assembly sections of the automotive industry need help”.
The motor industry has been hard hit by the global financial downturn and motor vehicle sales have plummeted in recent months. Thousands of employees in the sector have lost their jobs as a result, and trade unions have warned that tens of thousands more workers are facing unemployment.
General Motors South Africa (GMSA) has downsized its workforce in the past year by retrenching 1 000 employees on a voluntary basis.
“The company is currently reviewing its staffing requirements due to the continued deterioration in the vehicle market,” GMSA’s communications manager Denise van Huyssteen said.
Volkswagen South Africa has announced it will lay off 400 workers on a voluntary basis during the Easter period.
In September last year Ford retrenched 800 workers at its Port Elizabeth and Pretoria plants due to a decline in production capacity.
Trade union Solidarity says that 10% of jobs in the motor parts sector have been already cut and 30 companies are planning to retrench staff. These include Hayes-Lemmerz, Robor Stainless, Formex, Dana Spicer and Guestro Automotive.
Car producers such as Volkswagen, Ford and Toyota employ more than 110 000 South Africans.
The automotive industry plays a significant role in the country’s economy, accounting for 10% of manufacturing exports and 7,5% of the GDP.
Sales figures down
The latest sales figures released by Naamsa reveal significant declines in new vehicle sales. In January new vehicle sales were down 35,4 %, partly due to higher credit costs and a fall in demand for export.
These were the worst reported vehicle sales in eight years.
Car dealerships are also struggling to survive due to declining vehicle sales and have appealed for government help.
McCarthy Motors chairperson Brand Pretorius said about 130 car dealerships closed down last year due to decreased sales figures. McCarthy has closed 28 of its 148 branches over the past eight months.
Imperial Holdings shut down 22 of its 200 dealerships in the past year, Imperial Group’s strategy director Tak Hiemstra said.