After attending the Volkswagen Group Africa’s big investment announcent on 16 April 2024 of R4 Billion into the local Kariega plant I got to wondering just why we get all GAGA at the amounts being invested.
Take VW’s recent R4 Billion rand investment as an example:
- R4 Billion is currently the equivalent of EUR197.7 Million (Take it from me -mentioning Billions gets more headlines than mentioning Millions!)
- In 2023 Volkswagen AG reported a sales revenue of EUR 322.3 Billion (R6 526 Billion), an operating profit of EUR 22.6 Billion (R457.6 Billion) and a profit after tax of EUR 17.9 Billion (R362.4 Billion)
- Effectively the R4 Billion investment by VW represents 0.061% of 2023’s turnover, 0.87% of 2023’s operating profit and 1.103% of 2023’s profit after tax.
Let’s quickly compare Volkswagen’s Turnover with South Africa’s GDP (basically a countries turnover):
- The official estimate for South Africa’s GDP was EUR 764.18 Billion at the end of 2023 in purchasing power parity terms.
- That means that Volkswagen AG’s turnover is the equivalent to 42.17% of South Africa’s GDP
BUT, don’t get too excited yet – Volkswagen’s turnover comes from 684 000 employees whilst South Africa’s turnover comes from 7.1 million individual taxpayers and companies out of a population of around 28 Million,
Volkswagen Worldwide delivered 9.24 Million vehicles in 2023. In comparison South Africa (Africa’s) share of those deliveries is so miniscule in the eyes of the group that they do not even report the numbers under the country heading of South Africa or even continental heading of Africa. All VW sales out of Africa are reported under the heading ‘Other Markets’.
This is to be expected when your annual deliveries of around 160 000 vehicles is 1.73% of the global total for your parent company.
So – maybe we should not be so ‘glass half full’ and note that the Volkswagen investment of R4 Billion is 0.6% more than the after tax profit percentage that it represents. And also say that Africa represents massive future growth opportunities as our population grows and our population will eventually will overtake countries such as China and India. Which is a ‘clarion call’ to businesses worldwide to invest here now lest they get left behind in the rush to profit from Africa.
Remember, when the money finally lands in South Africa, it could land at a discount if the Euro becomes stronger against the rand.
With all of this ‘clever money’ being invested in South Africa’s automotive industry now is the time for our government and citizens to wake up to the very real possibility of South Africa becoming Africa’s automotive hub!
Lets have another look at Investment in the South African Automotive Industry:
The South African automotive industry has been attracting significant investments from manufacturers, contributing to its growth and development. These investments not only boost the local economy but also create job opportunities and enhance the country’s position in the global automotive market. In this article, we will explore the amounts of money being invested in the South African automotive industry, highlighting the manufacturers involved, the investment amounts, and the objectives of each investment.
Stellantis: R3 billion investment
Multinational automotive group Stellantis has recently confirmed its intention to invest R3 billion in South Africa. This substantial investment aims to establish a state-of-the-art manufacturing facility in the country. The facility will focus on producing vehicles that meet the growing demand in both local and international markets. Stellantis’ investment demonstrates its confidence in the South African automotive industry and its commitment to expanding its operations in the region.
Investment pledges worth over R4.6 billion
The Minister of Trade, Industry, and Competition, Mr Ebrahim Patel, has welcomed investment pledges worth more than R4.6 billion made by various automotive manufacturers. These investments are aimed at enhancing the production capabilities of the South African automotive industry and promoting its competitiveness on a global scale. The investment pledges signify the manufacturers’ belief in the potential of the South African market and their commitment to its growth.
Major OEM vehicle manufacturers: R8.8 billion investment in 2021
In 2021, major original equipment manufacturers (OEMs) invested a total of R8.8 billion in South Africa, marking the second-highest level of investment on record. These investments were directed towards various aspects of the automotive industry, including manufacturing facilities, research and development, and technological advancements. The significant investment by major OEMs highlights their confidence in the South African automotive sector and their long-term commitment to its success.
South African Automotive Masterplan (SAAM) 2021-2035
Under the South African Automotive Masterplan (SAAM) 2021-2035, the objective is to produce 1% of global vehicle production, which amounts to approximately 1.4 million vehicles. This ambitious plan aims to position South Africa as a competitive player in the global automotive market and drive sustainable growth in the industry. The investments being made by manufacturers align with the goals of the SAAM, focusing on increasing production capacity, improving quality, and fostering innovation.
The South African automotive industry is experiencing a surge in investments from manufacturers, with significant amounts of money being allocated to various projects and initiatives. These investments not only contribute to the growth of the industry but also create employment opportunities and drive technological advancements. The commitment of manufacturers like Stellantis and the investment pledges from various automotive companies demonstrate the confidence in the potential of the South African automotive market. With the implementation of the South African Automotive Masterplan (SAAM) 2021-2035, the industry is poised for further expansion and success.
