BUSINESS MAVERICK: SA’s car manufacturing system could help to get SA’s industrial development on the road

Japanese car company Nissan announced recently that it would be building a new model in South Africa, in this case, the Navara, a rather snazzy-looking bakkie, and as always that entails a wodge of new cash.

SA’s car industry system has its detractors, but overall, there is no denying it’s a fantastic effort. The industry is now about 7% of GDP and is now, amazingly, more or less the same size as the mining industry. What’s more, it is a great example of co-operation and co-ordination between business, government and labour.

It is worth noting that SA is in itself not a great place to build cars. The local market is small, and it’s far from the big markets around the world. The development of the industry has been a meticulous long-term effort which began in 1950s and which has been somewhat miraculously maintained by successive governments in the face of militant trade unions and very different governments with often different priorities.

Still, the differences are not huge, and to the extent that they exist, they are explained by import duties for the imported cars, and ad valorem duties for both. Like the bubble in a level, prices tend to even out. Profits, of course, do not, but given that none of the car manufacturers reveals their profitability by nation, we don’t really know what the differences are.

It’s understandable that the industry should be pro the scheme: It wouldn’t exist without it. The government, of course, is in a weak bargaining position because no government would want to be accused of destroying the car industry. But it’s much more complicated than it might seem. The great advantage in this respect, of the car business, is that it’s dominated by multinationals with global supply chains. Decisions might be hard to come by, but the number of players is small, and it’s easier to get general buy-in.

Source: News Formal (newsformal.com)

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