Exports of South African-produced vehicles into Africa are declining because of import levies introduced by some countries on the continent.
Theo Loock, the managing director of listed automotive products manufacturer Metair, said yesterday that some emerging markets in Africa, such as Nigeria and Algeria, had introduced duty protection against new vehicle imports, resulting in a reduction in the export opportunity for locally manufactured vehicles.
The Renault-Nissan alliance and west African conglomerate Stallion Group announced their intention last year to jointly launch vehicle assembly in Nigeria, indicating there was potential to develop the plant into a major manufacturing hub for Nissan in Africa.
Loock believed the intention of these countries was to emphasise that they were important and had “structural plans” for their markets.
He said the introduction of import duties was a strong incentive for original equipment manufacturers to get around the table with these governments to discuss market access in the future, including a localisation programme, local content and exemption on production and distribution deals.
Metair has a strategy of establishing a manufacturing footprint in Africa before pushing ahead with transforming itself into a global manufacturer.
Loock said the group was still working hard on entering into small partnerships, distribution arrangements or technology transfer agreements in Africa but the import duties were not a threat to Metair because its focus was on the aftermarket regardless of where a vehicle was produced.
“More than 55 percent of our business is batteries and more than 55 percent is in the aftermarket, which bodes well for our aftermarket business.”
Loock said the impact of the unstable labour environment in South Africa had been masked by the Automotive Production and Development Programme (APDP) because in normal circumstances the strikes would have led to vehicle manufacturers “running away from South Africa”.
He said the structural support provided by the APDP was necessary to attract new entrants to produce vehicles in South Africa, without which the production targets set by government for the industry would not be achieved.
Metair reported yesterday that headline earnings a share declined 16 percent to R1.20 in the six months to June from R1.43 in the previous corresponding period despite an excellent performance by Mutlu Akü, the leading lead-acid battery manufacturer and distributor in Turkey and the Middle East acquired in December last year for R2.9 billion.
Loock said the decline in headline earnings a share resulted from the dilutionary effect of the additional shares in issue, the additional depreciation charges and additional debt that resulted from the acquisition of Mutlu Akü. Metair reported a 16 percent rise in operating profit to R319 million in the six months to June despite its operating margins being dented because of labour unrest destabilising the manufacturing operations in its South African business. Revenue rose by 32 percent year on year to R3.24bn.
Metair’s shares yesterday slid 2.55 percent to R37.13.