South Africa’s transition from internal combustion engine (ICE) vehicles to new energy vehicles (NEVs) will displace many automotive sector workers, with around 67% of local component exports expected to be lost in the process.
This was the word from deputy finance minister Dr David Masondo last week, delivering a speech, titled: “Growing the SA automotive component manufacturing sector: A state perspective”, at the National Association of Automotive Component and Allied Manufacturers (NAACAM) 2023 show, in Tshwane.
Discussing the economic significance of the automotive sector, particularly local component manufacturing, he highlighted government’s role in providing more support to the industry, particularly components manufacturing in the context of NEVs.
The component sector, as part of the wider automotive sector, is a mainstay of SA’s industrial economy – so far contributing 4.9% to SA’s gross domestic product this year, he noted.
According to Masondo, last year, total automotive vehicle and component exports from SA were over R227 billion, and this number is expected to be significantly affected by the country’s transition to NEVs.
“As we look towards the future, embracing electric vehicles is not just a choice. It is imperative for the sustainability of our planet and the prosperity of our nation,” he explained.
“Like every transition, the emergence of new energy vehicles brings with it massive potential disruptions. With that disruption, [there will be] a host of risks and even more opportunities to channel the disruption into new industries, skills and jobs.
“The technical change in the labour process driven by artificial intelligence requires fewer blue-collar workers. Around 67% of SA component exports will be lost in the transition from ICE vehicles to NEVs. This simply means the transition will entail a fundamental restructuring of the labour market.”
A NEV utilises alternative energy sources instead of relying solely on traditional fossil fuels.
Last year, SA exported 360 000 vehicle units – 33.7% manufactured in Gauteng, 53.5% in the Eastern Cape and 12.8% in KwaZulu-Natal.
According to Masondo, the growth of SA’s automotive component manufacturing sector takes place in the context of systemic transformations driven by decarbonisation and artificial intelligence. The automotive sector will be, and is, deeply affected by these systemic changes.
“New employment opportunities will have to be created for those who will inevitably lose out. Reinvestment and support [will be needed for] reskilling and upskilling of the workforce to ensure the right skills are available for the design, engineering and manufacturing of electric vehicles and related components and systems.”
He emphasised the importance of fiscal assistance, supporting local original equipment manufacturers (OEMs) and adequate policies to drive the development of SA’s NEV industry and create a conducive environment for the transition to electrification.
While many jobs will be displaced, the emergence of NEVs will also result in new jobs created, added Masondo.
According to a report by the National Association of Automobile Manufacturers of South Africa, NEV sales by 14 industry brands in the country increased by 18.8%, from 1 401 units in the first quarter of 2022, to 1 665 units in the first quarter of 2023.
While SA is ahead of its African counterparts, it lags significantly behind on the global front.
The two-day NAACAM Show 2023 was hosted in partnership with the Tshwane Economic Development Agency. It was attended by over 1 300 guests and attracted 130 exhibitors, across established manufacturers and service providers in the automotive components sector, and emerging SMMEs, according to organisers.
A R4.8 billion investment pledge was announced by NAACAM CEO Renai Moothilal on the final day of the event.
The pledges were made by 16 of the show exhibitors, consisting of companies specialising in SA’s e-mobility industry, including Atlantis Foundries, Shatterprufe, Ebor Automotive Systems, Auto Industrial Group, Formex Industries Acoustex and CRH Africa Automotive.
“These pledges reflect the importance of SA’s e-mobility sector to the local economy and they were all productive investment-related. This includes plant upgrades and new technology to support OEM customer requirements,” said Moothilal.
Trade, industry and competition minister Ebrahim Patel also spoke at the event and welcomed the pledges made. The investments will support more than 10 000 jobs, he noted.
“I am particularly pleased to be part of this major announcement today, because investment is the lifeblood of every economy. It contributes to expanding the economy, creating jobs and providing taxes that government can use to build hospitals, schools, universities and many other positive things that contribute to improving the lives of our people. This is a strong vote of confidence in the South African economy by the automotive components makers.”
Patel added that government needed to respond to the private sector’s appetite to invest in the South African economy by creating a conducive environment, where companies are confident in putting money into building more factories.
“I was also pleased to learn that two of the companies that made pledges are black industrialist-owned firms that have been brought in as a result of the Automotive Industry Master Plan and the Automotive Industry Transformation Fund (AITF).”
The AITF was established as a collective equity equivalent investment programme as defined in the broad-based black economic empowerment codes between seven multinational automotive manufacturers in South Africa.
It aims to facilitate transformation across the sector’s value chain through the provision of access to developmental funding, the market and capacity development for qualifying black-owned entities.