Protocol,
Fellow stakeholders, it is our singular honour to join you this morning on this important occasion of your Annual General Meeting. I wish to start by extending MEC Mabuyakhulu’s sincere apologies for not being able to join you at this important gathering. As you are aware, his department is a host to the International Entrepreneurship and Investment Conference wherein issues of regional economic growth and promotion of entrepreneurship are being discussed.
For many years, the automotive cluster has been one of the mainstays of the economy of our province. This is one of the sectors that practically expressed its confidence in the potential of our province when other sectors were not sure about the province’s prospects. Today, this sector, notwithstanding challenges, has grown in leaps and bounds and has invested immeasurably in growing the economy of our province
One of the writers aptly-describes the industry asa “… turbo-charged engine for the manufacture and export of vehicles and components. The sector accounts for about 10% of South Africa's manufacturing exports, making it a crucial cog in the economy”.
In an era where job losses are the order of the day worldwide, following on the recent economic downturn which still grips some parts of Europe, it is comforting to have in our corner an industry that is committed to the province and the country.
Programme director, it is well-known that the manufacturing sector, of which the automotive sector is a key part, is the backbone of many successful economies. Germanys’ recovery from the devastation of World War two was at the back of this sector, while all of us know that Japan attained global economy status because of the manufacturing sector. The creativity and innovation of any economy, which in turn determines the status of that economy, finds its expression in the manufacturing sector. Therefore, in order to ensure that our provincial economy remains competitive, it is in the interests of both the state and the automotive industry itself to ensure that this industry thrives.
As government, we have, through the Motor Industry Development Programme (MIDP) in 1995, shown our commitment to the industry. It is our view as government that our country should be able to increase vehicle production to 1.2 million units by 2020 while ensuring that the local content is also increased.
However, we are aware that the fact that the MIDP will slightly alter form and content post-2012 does create a bit of nervousness among industry stakeholders. We are here today to re-affirm our commitment as government to ensure that this industry thrives. It is not in the interest of government’s objectives to growth the economy and address unemployment to preside over the demise of this industry.
Yet, we need to appreciate that the conditions under which we have to conduct our business change and, as such, we have to adapt in order to remain relevant. We are aware that there are those who refer to MIDP as a form of protectionism and that there is a lobby mostly from outside our borders that would want to see us do away with this programme. As a country, our first loyalty is to our industries and nurturing our economy.
In this regard, we want to assure that we will not shirk our responsibility to provide the kind of support to ensure the industry’s global competitiveness.
However, as an industry we must be awake to the fact with the rapid process of globalisation and the looming regional economic integration, we need to ready ourselves for the opportunities that will come with these developments. In equal measure, we must have foresight to deal with the challenges of looming trade liberalisation.
One of the saddest tales about economies of African countries is to witness the demise of an economy that was once a continental powerhouse with dire consequences for that economy’s people. We are all aware of countries that, not so long ago, were bread basket countries of our continent which have today fallen on hard times with their citizens living way below the bread line. Politics aside, one of the causes of these scenarios is countries’ inability to change with the times. As the automotive sector in KwaZulu-Natal we should avoid this fate at all costs.
As most of you were part of the 2009 Economic Recovery and Jobs Summit which we called to address the effects of the recession, you would be aware that we had formed sector-specific think-tanks to come up with ways of how we could revive those sectors post-recession and ensure their sustainable growth. We commend this industry for participating meaningfully in the think tanks, work which has resulted in the draft Automative Sector Strategy which aims at safeguarding and promoting this industry. As most of you were part of this, the Strategy itself was widely-consulted among industry stakeholders.
We hope that once formally adopted, as a sector you will also be vital in giving the strategy practical expression because the reality is that if the industry does not drive its implementation then it will become another fancy document that will always remind future generations of what could have been achieved. I am convinced that none among us want to be remembered for presiding over the demise of this sector.
Fellow stakeholders, economists have argued before that the worst thing that can happen to any player in the economy is to waste a good recession. Because a recession or a downturn forces one to re-think one’s approach and compels one to fight for one’s survival, it teaches us hard lessons about one’s sphere of operation. It is widely-accepted that the developing world did not suffer the worst effects of the economic downturn. This in turn meant that, for us, the downturn provided an opportunity to close the gap between ourselves and those who play in the same field in the developed world. However, it seems, that period of grace is swiftly passing by.
According to PricewaterhouseCoopers’ Autofacts:
Rather than being remembered as yet another period of precipitous emerging market growth, 2010 may be more broadly viewed as a year that yielded global auto industry recovery. Of the 13.3 million units of incremental light vehicle assembly in 2010 over 2009, Autofacts estimates that 68% of that build was derived from recovery volume, while 32% was new organic growth.
In the final quarter of 2010, the surprising strength of assembly recovery in the European Union (EU) prompted Autofacts to make an upward revision of 450k+ units in 2010 as previous expectations of a weaker Q4 only materialised in isolated cases. Instead, the EU assembly footprint rebuilt volumes through increased export demand in recovering and expanding markets like the US, China, and Russia. While sequential assembly gains in 2011 are likely to push global auto industry output over 75 million units for the first time, growth is expected to be more balanced as recovering countries added nearly nine million units of output in 2010, but will likely contribute two million units in 2011, a volume similar to that expected from countries largely unaffected by economic recession.
This, fellow stakeholders, means that we have to move with the necessary speed to implement our strategy understanding that the world’s established players in the automotive sectorare recovering swiftly and, in no time, will go back to their glory days. Critically, we must occupy ourselves with looking at how regional integration can assist us in growing this industry beyond the border of South Africa. The Southern African Development Community (SADC) has a market of more than 257 million people. Notwithstanding the risks, we need to ask ourselves as a sector how can we access this market before our competitors from the developed world overtake us?
This is the task of this cluster. As government we will continue to assist this sector but as all of us know the role of government is limited only to creating conditions for the industry’s growth. It is up to the industry players themselves to ensure that this happens. As the government of KwaZulu-Natal, we are more than confident that you will live up to this challenge.
I thank you.
