Naamsa responds to Economic Recovery Plan, commissions new study

South African auto manufacturers note government’s Economic Recovery Plan, point to economic and fiscal reforms as key.


The National Association of Automobile Manufacturers of South Africa (Naamsa) has listed a strong developmental recovery plan, economic and fiscal reforms and the elimination of corruption as being key to the country’s economic revival.

These were the pivotal elements noted by Naamsa on Friday 16 October 2020 in its response to the Economic Reconstruction and Recovery Plan delivered by President Cyril Ramaphosa on Thursday 15 October.

An economy on the skids through lockdown

According to Naamsa, “the Economic Recovery Plan was presented at the back of escalating fiscal and social crisis, which had been looming over time with the economy having had two quarters of recession pre-COVID-19 and further exaggerated by the impact of COVID-19 concomitated lockdowns”.

“The COVID-19 quarter saw the economy go into a 51% GDP (Gross Domestic Product) contraction in the second quarter of 2020. The expanded unemployment rate descended to 42% with 2.2 million people having lost their jobs,” said Naamsa citing Statistics South Africa (Stats SA).

“The cost of servicing SA’s debt is rapidly increasing and expected to reach an 80% mark by December 2020. According to the International Monetary Fund (IMF), the South African economy is expected to contract by 8% by the end of 2020 before recovering to an average of 3% in 2021,” continued Naamsa.

Navigating the rough road ahead

The industry body said the economic recovery projections for the next coming years are not nearly enough to mitigate against the deepening fiscal crisis, increasing debt-to-GDP, and job losses in the economy.

“A strong developmental economic recovery plan alongside economic and fiscal reforms, and the fight against corruption will be key in addressing SA’s economic challenges and in reviving the economy,” asserted Naamsa.

Some light at the end of the tunnel

Naamsa went on to note that: “In April, the national government announced the fiscal and monetary policy stimulus relief packages worth R800 billion and allocated additional funds during the July 2020 supplementary budget announcement.

“The president has further announced an economic recovery plan of which interventions include the commitment of R100 billion over the next three years to create 800 000 jobs, greater efforts around infrastructure plans with R1 trillion being allocated over the next four years, and a commitment to promote industrial efforts in the country. 

“The R350 special COVID-19 grant will be extended by three months, and more work is being done at Nedlac on investigating and gathering information on sustainable evidence-based income grant approach.”

What needs to be done

Naamsa further acknowledged that: “The National Treasury tax revenue projections show a shortfall of R300 billion for the 2020/2021 fiscal. As such, the government will have to put out more tighter security measures around the handling of money in government departments and in regions and will have to ensure that there is adequate state capacity for service delivery purposes.”

With respect to this, the body noted that the infrastructure strategy should be a catalyst of growth for manufacturing production capacity, operations in the mining industry, and all sectors that have higher return to GDP and employment.

“The infrastructure development plan should also focus on cost and efficiency in transport and ports systems for the export-oriented industries.

“Cost and efficiency improvements in logistics costs would enhance the automotive industry’s international competitiveness and is also one of the key pillars under the industry SA Automotive Masterplan 2021-2035 of which the objectives include to produce 1.4 million vehicles per annum by 2035, doubling of manufacturing employing and transformation of the industry value chain, among others,” commented Naamsa.

Grey imports of significant concern

The organisation said it was “particularly concerned” about the impact of grey imports on the domestic industry.

“Approximately 300 000 of the 12.7 million vehicles on South Africa’s roads are illegally operated, which could potentially result in the fiscus losing around R3.8 billion per annum in tax collection.

“New vehicle sales are linked to the strength of the economy and the year-to-date new vehicle sales, contracted by 33.4% or 132 878 units compared to the corresponding period last year owing to Covid-19 market contraction,” it said.

Naamsa takes initiative with study

Naamsa also announced, as part of its COVID-19 mitigation strategies, that it had commissioned a study aimed at exploring ways to stimulate new vehicle demand in South Africa.

“The Medium-Term Budget Policy statement which has been postponed to 28 October should provide more directive on the plans for the priority programmes set out in the country’s economic recovery strategy document and linkages to fiscal consolidation,” concluded Naamsa.