Africa could potentially be a massive market for the motor industry, but this is a currently a long way off. Even in the north and south, the industry has been slow, with South Africa remaining the sole economic engine. A stable economy with low interest rates and low inflation is currently providing the confidence that South Africa's auto industry needs to help it grow.
According to Goolam Ballim, group economist at Standard Bank, the industry in South Africa will be boosted by black spending power, as, "Black spending is forecast to double by 2007 and will outstrip white spending with an estimated 5.5% income growth."
Black consumers are in the early stages of their asset acquirement and there is a market for low end products that don't dilute the brand value of high end products. This means there will be strong demand for cars and other durables such as televisions and hi-fis.
It is against this fairly stable background that world automakers have announced investments of more than R7bn in South Africa so far this year. These include Toyota, General Motors and Volkswagen.
This briefing begins by looking at the demographics of South Africa, and stability of its economy, which is set to boost growth in the motor industry. It examines the investments that vehicle manufacturers have made in South Africa already in 2005, through opening new manufacturing plants. It also highlights the potential difficulties faced by manufacturers, in a continent where used vehicle imports are stifling hopes of selling new cars. According to independent analyst Johan Cloete "Used cars, especially RHD from Japan, are being dumped all over Africa and new cars cannot compete with those prices."
This briefing identifies a need to bring Africa to European standards of education, improve quality and invest in technology, so that it can successfully compete with the used car market.
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