Johannesburg - South Africa’s automotive exports to the UK and EU, the industry’s most important trading partner, could be dented by Brexit.
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The Organisation for Economic Co-operation and Development estimated that UK gross domestic product (GDP) under Brexit would be 3 percent lower than it would have been if the UK stayed in the EU and every country in the EU would suffer a 1 percent growth decline.
National Association of Automobile Manufacturers of South Africa (Naamsa), director Nico Vermeulen said on Friday a lower GDP growth rate in the EU and UK might have an effect on demand for motor vehicles, but this was likely to only be a temporary phenomenon.
Vermeulen said a broad free trade agreement governed trade between South Africa and the EU and South Africa would have to arrange a similar trade agreement with the UK that it has with the EU.
“There might be a marginal reduction in export volumes to the UK in the short term but, depending on the type of trade arrangement we are able to negotiate with the UK, in the medium to longer term it will not have a major impact,” he said.
Vermeulen added that it was not known to what extent Brexit would result in reduced UK economic growth.
Impact
According to the 2016 South African Automotive Export Manual, Europe accounted for 44.3 percent or R67.1 billion of total automotive exports of R151.5bn and 54 percent or R78.9bn of total vehicle and automotive components of R146.2bn last year.
Since the EU also accounted for more than half of the country’s vehicle exports in volume terms, developments in the region had “a direct and measurable impact on the domestic automotive industry’s overall performance”, it said.
The manual said Mercedes-Benz, Volkswagen, BMW, Toyota and Ford exported a total 48 669 passenger and light commercial vehicles to the UK last year.
Vehicle exports to the EU increased last year by 50 percent year on year to 173 796 units. Volkswagen is believed to be the largest exporter of passenger cars and light commercial vehicles from South Africa to the EU.
Matt Gennrich, the communications general manager at Volkswagen South Africa (VWSA), said it supplied all the right-hand drive Polos into the UK and VWSA’s total vehicle exports this year were projected to reach 68 000 units.
Isaac Matshego, an economist at Nedbank’s group economic unit, said any impact would be short lived and Brexit still had to be negotiated over the next two years.
BUSINESS REPORT