The automotive industry, South Africa’s 5th largest exporting sector, is at an incredible point in its evolution and this presents both an extraordinary opportunity – and an enormous challenge.
Let’s look at the bad news first. According to the National Association of Automobile Manufacturers of SA (Naamsa), the automotive manufacturing sector accounts for 18,1% of total exports and 2,4% of South Africa’s GDP. Here’s the problem. This figure has already fallen since 2017, when it contributed 6,9% to the country’s GDP (4,4% vehicle and component manufacturing and 2,5% retail), and as the world moves increasingly towards electric vehicles, is in danger of falling even further. As a major employer in South Africa, this would not only be a huge blow to our country’s economy, but to our people as well. We are facing a major unemployment crisis, and this is a sector that has the potential to make a radical difference in the future of our country.
Shifting away from combustion engines to electric vehicles is a key component in many countries’ climate change goals and plans. In Europe, the trajectory is clear – Naamsa estimates that in 2030, 40% of all vehicle sales in Europe may be EVs, and that number can increase to 80% by 2040.
The European Union, with exports of R129.7-billion, or 64.3% of the total export value of R201.7-billion, was the domestic industry’s main export region in 2021.
According to Mikel Mabasa, CEO of Naamsa, it is clear that South Africa cannot ignore EVs if the sector wants to continue doing business with Europe. It will also have a huge impact on the country if we lose R201-billion in export earnings a year. The solution? South Africa needs to start investing heavily in EV manufacturing.
New technology requires new skills
As with all new technologies, new skills are required. This is not only true of South Africa, but of the entire world, and it’s one of the reasons why so many of our skills are being poached. According to Mabasa, the local industry is currently experiencing a technical brain-drain, as motor companies in Europe, Asia and the rest of Africa poach SA automotive engineers to work on EV technologies.
As we see across all sectors, without the right skills in place, it is extremely difficult to remain competitive or grow a sector. This is possibly one of the reasons why South Africa is losing its status as the production hub of the African motor industry. As Mabasa revealed, in 2021, SA accounted for 62.3% of the continent’s production capacity. A year later, it was 53%. He believes it will soon be below 50% if urgent action is not taken.
One solution solves multiple problems
One of the reasons why the automotive manufacturing industry is often heralded as one of our country’s crown jewels is our extremely well-developed automotive value chain that is closely tied to both domestic and European dynamics.
But as we know, industries that do not adapt and evolve lose their competitive edge. This is why the South African Automotive Masterplan (SAAM) 2021-2035 was developed. This key sector must be protected at all costs. Some highlights of this plan include the goal for local vehicle production to make up 1% of global production by 2035, to double automotive employment in the supply chain and to improve automotive industry competitiveness levels to that of leading international competitors.
To achieve SAAM’s objectives, Naamsa says that careful coordination and a close working relationship between government, the private sector and organised labour will be required, as well as the realisation of six industry development pillars. These are:
- Local market optimisation
- Regional market development
- Localisation
- Infrastructure development
- Industry transformation
- The development of industry-required technologies and skills.
At PMI, we have long understood how critical this sector is for the future of South Africa’s people and economic growth. We have invested heavily in Production Technology offerings focused specifically on the vocational and higher education space in the automotive sector and we’ve fine-tuned our industry expertise for over 40 years through our partnerships with OEM manufacturers.
We’ve always understood how important our role is in supporting the growth of this sector, and SAAM’s 6 pillars cement it – without the 6th pillar focusing on skills development, the other 5 pillars are unattainable.
Supporting the automotive manufacturing sector’s
Sustainable Developmental Goals (SDGs)
As a member of the Adcorp Group, PMI has a larger purpose that is directly linked to one of the 17 UN Sustainable Developmental Goals (SDGs) – Goal 4: Ensuring Inclusive and Equitable Quality Education.
This is particularly relevant within our borders, with a large portion of our workforce unable to access quality education in the past.
Accessing vocational and higher educational training at NQF level 4 solves two key challenges for automotive companies and multiple South African issues as well. First, it helps automotive businesses achieve greater alignment with global ESG trends (which is vital if the sector wants to make up 1% of global production by 2035); it opens the potential for local manufacturers to attract more ethically and socially responsible investment; and it ensures a more diverse, equitable and inclusive workplace and sector for all. Finally, it brings much-needed new skills into the market to address the need for a shift towards EV manufacturing.
And for South Africa? International evidence reveals that the quality of education and skills development promotes economic development in the long run. Therefore, it has been proven that prioritising an Environmental, Social, and Governance (ESG) proposition leads to greater value creation within businesses, which allows companies to grow, increase their competitiveness, employ more people and contribute more towards the economy – all positive outcomes for our country as a whole.
Partnering with PMI
At PMI, we partner with our automotive manufacturing clients to implement key strategies aligned to their ESG agenda and in particular, quality education. As part of the Adcorp Group of companies, we have chosen to deliberately focus on becoming the experts in the areas of ESG and in particular, quality and equitable education and employment opportunities.
When you work with PMI, we ensure access and opportunities for skilling your workforce through offering quality education programmes. We are a level 1 contributor on the BBBEE scorecard and we are well represented nationally, with campuses in all major provinces.
Let us partner with you in building your inclusive and future-fit workforce through the power of learning. Visit PMI by Adcorp today to find out more!
