THE imposition of the 30% tariffs by the United States on South Africa from 07 August is a big blow for local businesses, especially in the automotive and agricultural sectors, says Denise van Huyssteen (pictured), chief executive officer of the Nelson Mandela Bay Business Chamber. She adds that the Eastern Cape economy is likely to be the most adversely affected in the country by these developments.
“This is not just an issue which affects companies that do trade with the US, it is a global issue. The global trading system has been upended, and relationships between long-standing trading partners will shift as countries move to protect their own interests and domestic economies. Multinationals will also adjust their manufacturing footprints to assemble in those markets where they can do so the most efficiently and competitively,” said Van Huyssteen.
She said the Chamber is deeply concerned about the impact these developments may have on the automotive industry, anchored by the Original Equipment Manufacturers (OEMs), which undertake completely-knocked down (CKD) assembly in South Africa. “These OEMs are responsible for creating well over 100,000 jobs at their own operations and within their components supplier networks. Furthermore, it is estimated that the knock-on employment impact of these OEMs and components manufacturers results in over 500,000 formal jobs being created across the entire automotive supply chain. Around 40% of automotive employment in the country is located in the Eastern Cape.
“The economic ecosystem around CKD manufacturing goes beyond the component manufacturers and suppliers, extending into the logistics and transport sectors, and indirect suppliers to each plant of everything from office supplies, workwear and tools to services such as banking, IT, cleaning, catering, security, maintenance, marketing, and so on. Even beyond this, sectors such as tourism, hospitality, real estate, events and conferencing, retail, education, and personal services – all benefit from the ripple effects of a strong local manufacturing base,” she said.
It is estimated that each job in top-tier manufacturing creates another five jobs through the supply chain, with substantial socio-economic impact as each employed breadwinner supports approximately 10 people in extended families and communities as well as spending their income in local businesses.
“We welcome the establishment of an Export Support Desk by the Department of Trade and Industry to serve as a contact point for impacted exporters. We hope that the South African government will continue to engage with the US in an attempt to secure a more favourable outcome. Along with this it is vital that other emergency measures are rolled out to protect local manufacturers.”
She urged government to move with speed to step up and take action to protect local manufacturing and put it on a much more level playing field with global competitors. “We need better support to strengthen local manufacturing through incentives that encourage CKD rather than semi-knocked down (SKD) manufacturing, and tariffs that favour locally manufactured vehicles over imports.”
Van Huyssteen called for more favourable investor incentives and incentives that promote localisation of components along with policy that requires importers to localise once they reach a specified threshold of local sales.
“It is essential that the government moves to strengthen trade relations with existing key markets such as Europe and South-East Asia. This must be directed at retaining and growing mutually beneficial trade opportunities.
“We currently do not have specified free trade agreements in place with BRICS markets and our trade with these countries tends to be orientated around South Africa providing unbeneficiated raw materials and these countries in turn providing us with finished manufactured products. There needs to be an urgent and concerted focus to change this equation, so that it becomes more balanced, to enable SA to also provide manufactured goods, thus enabling the retention and creation of meaningful local jobs.
“Finally,” Van Huyssteen said, “We need to make South Africa much more competitive so that we can compete with global locations and this starts with ensuring that we have an enabling environment in place. This requires that municipalities deliver efficient basic services, logistics efficiencies are improved, and critical issues like safety and security are prioritised.”
