The Resilience of the South African Automotive Industry

The Resilience of the South African Automotive Industry

There was an old joke in the 1970’s, which is still applicable today. It goes something like this: God was busy with the creation of Earth, and he was directing his assistant in pouring minerals onto the continents. When they came to southern Africa, God instructed his assistant to pour an enormous amount of gold. The same for platinum. Then uranium. Then diamonds. Then iron ore. And on and on it went. Eventually the assistant asked, “Why so much for one small region?” God replied, “Wait till you see the governments I give them.”

Funny then, and funny now. Or maybe not so funny for the businesses that have to try and survive with such lousy governments. As I have been in the automotive industry virtually my entire working life, this joke has got me thinking lately, and specifically about the resilience of the South African automotive industry.

For me, it all started in 1976. Thanks to my financial studies, I had been promoted to Pricing and Profits Supervisor: Parts and Accessories, at Volkswagen, Uitenhage. My job was to ensure that the pricing of individual parts did not contravene the legislation at the time and that overall gross profits did not exceed 33,33% (yes, they had pricing and profit controls in those days), because there were hefty penalties for those who crossed the line. Being a nerd in the Bill Gates mould, every month I proudly managed to keep the gross profit levels at between 33,25% and 33,30%,with the support of a not so sophisticated computer system, which was quite an achievement for 40 000 line items. Everything looked rosy, and I was keenly awaiting my next promotion. And then boom, the 1976 Soweto uprising began on 16 June. Suddenly, the world was turned upside down, and within a matter of days the vehicle market fell through the floor. Ironically, the P&A Dept was the saviour of VW during those harrowing times, because parts are needed through good and bad times. But a price was paid for the government’s bumbling policies, with 10% of the staff been retrenched that year. Things steadily got better after that tumultuous year, and in 1981 VW was again rolling in the cash, with a booming new car market, and a high market share.

Alas, the roller coaster ride started again after that wonderful year. Disinvestment began, with many automotive brands leaving the country, and many manufacturing facilities taking South African ownership. We meddled on, and then we had the infamous Rubicon speech in August 1985, which killed the Rand overnight, and the Reserve Bank was forced to hike interest rates up to something like 28,5%. I had invested in a used car business in 1983, and I watched mortified as the used car business dried up. I could continue with chapter and verse, but suffice to say the roller coaster continued with varying degrees, as we looked on with jaundiced eyes as the local content programmes went from weight to value, with little tweaks here and there every few years.

Then along came 1994 and the hope that we would soon approach normality. The MIDP was introduced in 1995, and now it is the MPDP, with a promised review 18 months overdue and counting. Presidents came and went and then, boom, in 2009 we got Jacob Zuma. The economy has never recovered, and together with his non-NDP programme and boom and bust commodity cycles, the Rand and the economy once again is doing its yo-yo impersonation.

Amazingly, both the OEMs and the component manufacturers are hanging in there, waiting for their next break.

We are a resilient lot.

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