Thought Leadership

BLSA CEO’s Weekly Newsletter – SA’s motor industry is focused on the future

20/10/2024 | By Busiswe Mavuso

The auto industry is an unsung hero of the South African economy. I was pleased to join the industry for its annual conference in Cape Town last week, where the discussion was firmly focused on the future. The industry must transition to cleaner fuels, particularly electric vehicles, and there was much at the event about the effort. I joined a panel to discuss the outlook for business under the government of national unity and the positive momentum it has been creating for financial markets and business. It has the potential to galvanise the industry’s transition, in advance of the imposition of the European Union’s Carbon Border Adjustment Mechanism, which will impose tariffs on imports that have a large carbon footprint.

President Cyril Ramaphosa also spoke at the event, pointing to the fact that the industry accounts for 15% of our exports and employs 116,000 people directly in vehicle and component manufacturing. He also noted that it has been a century since vehicle manufacturing began in South Africa, with the first Model T Ford rolling off a production line in Port Elizabeth in 1924. That is a proud legacy and the industry continues to play a big role today. It was good to hear how it is preparing for the future.

There was a strong show of political support for the industry, with the president and ministers like Parks Tau, minister of trade, industry and competition, in attendance. Their presence is good for confidence, and there were conversations that indicated a strong political desire to support the industry to be competitive and to grow.

Of course, like most of the rest of our industries, auto manufacturers have had to contend with load shedding and logistics challenges. That has been a major constraint on its growth for several years. But it is now benefitting from progress made, with a more stable electricity supply and some easing of congestion in ports. It needs effective rail and ports to get vehicles to the 148 countries it currently exports to, selling R271bn-worth. It also needs effective local government services in order to operate its plants. This is true of all businesses, and it is why it is critical that we have effective working infrastructure at the local level.

The effort to drive investment into infrastructure has been a hallmark of Ramaphosa’s time as president, with the creation of Infrastructure South Africa and the Infrastructure Fund as part of those efforts. I was pleased to see last week the launch of a reinvigorated effort to drive the development of projects to accelerate infrastructure investment. The Department of Public Works and Infrastructure, together with Infrastructure South Africa, have launched a window for submissions to apply for project preparation support. All levels of government, as well as the private sector, can apply for support for public infrastructure projects, which can be in many sectors from transport to municipal infrastructure.

This tackles one of the challenges facing projects – the need to make them “bankable”. This means the project is sufficiently well developed to be viable for funders, with a clear risk and return profile that investors can be comfortable with. There have often been complaints that project developers simply lack the capacity to get proposals and plans to the bankable stage, and as a result, the projects are never able to attract funding. This is particularly important for projects that will form public-private partnerships, in which the private sector will invest and potentially manage or build the infrastructure. DPWI minister Dean Macpherson said the project preparation bid window will help increase the trust the private sector has to invest in state infrastructure projects, which is critical if large volumes of investment are going to be mobilised. The minister said government is aiming to rapidly turn South Africa into a “construction site” that will create growth and jobs. I can only applaud the sentiment.

It is important that infrastructure is considered in terms of the impact it has on the economy – enabling companies, like those producing cars and components, to be effective. Infrastructure is not important for its own sake, even though it creates jobs during the construction period. The real payoff is enabling companies and entrepreneurs to access markets and operate efficiently. That then enables them to invest, which is when much more job creation and economic growth happens.

Both the Naamsa conference and the DPWI’s announcement were encouraging. They show government and business hearing each other – understanding what needs to be done to unlock growth and opportunity.

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Also last week I got to be part of a roundtable discussion with JP Morgan chairman and CEO Jamie Dimon, an event which dived deeply into geopolitics, the global economic outlook, US elections, interest rates, and the role of business in socioeconomic development, and much more. Dimon’s insights were captivating. It was enlightening to hear his thoughts on the war in the Middle East and China’s position in the global economy.

What struck me most was Dimon’s emphasis on the importance of community development by business as well as the importance of business and governments working together. South Africa was his last stop on an African tour, which made the discussion even more significant. It’s heartening to see a global financial giant like JP Morgan recognising the potential and opportunities in Africa. His visit underscores the continent’s growing importance in the global economy.

It added a global perspective to the themes we grapple with here, particularly on how countries that succeed are those in which government and business work well together. I left feeling encouraged and motivated, knowing that organisations like JP Morgan are dedicated to making a positive impact on the socioeconomic landscape.

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I was concerned to read in yesterday’s Sunday newspapers of the National Prosecuting Authority’s struggles in obtaining national security clearance for its senior staff. Clearance is the responsibility of the State Security Agency, an agency that was deeply embroiled in State Capture. The Zondo Commission and a specially appointed Presidential Review Panel made many recommendations including new legislation and the splitting of the agency into domestic and foreign arms. Those recommendations are still being implemented.

The rebuilding of the National Prosecuting Authority obviously poses a threat to those who are yet to face justice for their roles in State Capture. There is every incentive for those who could be in the firing line to use their powers to frustrate its efforts and cast aspersions against its senior leadership. We saw this playbook used so often during State Capture, to undermine Sars among others. We must see through it now. The NPA is vital to the restoration of the rule of law in our country, which is essential to our economy, and it is important for all of us that justice is done. Its efforts must be supported.

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BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.