At the Automotive Industry Development Centre (AIDC) breakfast seminar yesterday I got to wondering just how difficult a job Weza Moss and colleagues were facing in growing and keeping automotive manufacturers happy and in South Africa.
With the Fourth Industrial Revolution (4IR) in full swing the competition to provide more stuff at lower prices is immense. 4IR is based on the use of cyber physical systems and combines IT + Commerce + AI to automate many jobs. Artificial Intelligence (AI) then makes use of the Internet of Things (IoT) and Blockchain for verification.
The hard and fast rule of failing to be consumer centered still remains the biggest threat to any business. This, unfortunately, is where our government falls flat as they fail to treat citizens, investors and existing business as consumers and, as a consequence, fail poorly at service delivery.
The mark of our failure is quite simply in the numbers – it is a crying shame that we as a country perform worse than one single global manufacturing business.
As an example I took the GDP of South Africa for 2018 and compared that to the Worldwide Sales of the parent of one of our major local manufacturers, VWSA.
In 2018 South Africa’s GDP was EUR 331.1 Billion (far less than SA’s 2011 GDP of EUR 374.9 Billion).
VW Projected annual sales for 2019 (based on 9 months sales of 186.6 Billion) = EUR 248.8 Billion.
We need to extract the automotive sector contribution to SA’s GDP from that – the automotive sector in South Africa is the mainstay of the national industrial base and in 2018 accounted for 6.8% of GDP (4.3% manufacturing and 2.5% retail).
4.3% of SA’s 2018 GDP = EUR 14.2 Billion
Let’s look at the above numbers:
- Volkswagen’s Worldwide sales are projected to fall short of SA’s total GDP by EUR 82.3 Billion
- South Africa’s ENTIRE GDP contribution from the ENTIRE Automotive sector represents 5.72% of Volkswagen’s Worldwide total sales (GDP equivalent)
- South Africa operates on a budget deficit (loss) of around 4.2% of GDP. According to Statistics SA South Africa’s gross loan debt stood at R2.2 trillion in 2016/17. This translates to about R40 000 per person living in the country.
- Volkswagen’s Profit (surplus) before tax rose by 16.9 percent to EUR 14.6 billion for the first nine months of this year.
What does this tell us?
- The playing field between big business and South Africa is very uneven and biased toward big business.
- As a country we need to concentrate on developing winning mindsets and becoming profitable – THAT will attract more meaningful investment.
After all, in our private and business lives, we only want to associate with winners and more powerful people so why should that be different for governments / countries?
Ask yourself why money is flowing into countries like Rwanda (8% budget deficit and a GDP that has more than doubled in the last 10 years) and Ethiopia (3% budget deficit and a GDP growth that has more than doubled in the last 10 years).
Alan Straton
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