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MTBS: an auto industry perspective

Home Manufacturing & Processing Automotive MTBS: an auto industry perspective

by Thabo Shenxane

The Automotive Industrial Development Centre Eastern Cape (AIDC EC) has noted several key issues for the automotive sector in Minister Enoch Godongwana’s 2021 Medium-Term Budget Policy Statement.

While he did not reference the automotive sector specifically, the Minister stressed the acceleration of economic reforms for long-run growth, including improving competitiveness, productivity, investment and employment.  These are all requirements for a thriving automotive industry that our province is benefiting from.

Our OEMs have been patient investors in our province, and it is time government attends to the ingredients that makes it easy to retain and attract new future investments.

Central to these and what he described as government’s “first and immediate task”, is to ensure stable energy supply, reduce the risk of load-shedding and accelerate the transition to renewable energy sources. While much damage has already been done and while competitiveness has been heavily impacted by electricity tariff increases, addressing security of supply by adding additional capacity to the grid through renewable energy is welcomed progression.

Automotive manufacturers must capitalise on government’s new regulations which has raised the licensing threshold for self-generated power from 1 to 100 megawatts and consider a range of energy solutions and funding arrangements for these investments, including power purchase agreements which require zero capital outlay for solar installations that provide businesses with monthly, guaranteed power savings.

It is also good news that the Minister highlighted as part of a second set of reforms, a focus on improving the efficiency of South Africa’s logistics infrastructure to support export growth. Another key requirement for the functioning of the automotive industry.

With this in mind, the debate around investing in the East London Port needs urgent priority and attention. The competitive efficiency of the Port of Ngqura compared to other ports internationally also requires absolute attention. The Minister’s pronouncements in the speech are a step in the right direction.

The corporatisation of Transnet’s National Ports Authority as an independent subsidiary of Transnet with its own board, it is hoped will create incentives for efficiency and competitiveness between port service providers – reducing delays, improving services and introducing cost discipline.

That Transnet Freight Rail will allow third-party access to the freight rail network by the end of 2022, presents an opportunity to the automotive supply chain. Allowing private rail operators to use the freight rail network will bolster system volume and capacity.

The third issue that signals positivity is the announced clamp down by government on inefficient SOEs and their potential restructuring, informed by an assessment of their strategic relevance.

In this MTBPS, the minister says no provision has been made for additional funding for state-owned companies. The exception to this is where guarantees have been called by creditors and conditions have been met by the SOC in question, within the context of their strategic importance.

The AIDC EC will continue to monitor the impact and opportunities of these developments on the automotive supply chain and also inform and support provincial and national government in these interventions.

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