South Africa has produced motor vehicles since the 1920s, mainly through assembly operations for overseas manufacturers and this is the basis of the motor industry in the country today. The Automotive Production and Development Programme (APDP) was established in 2013 to help stimulate the industry and replaced the previous Motor Industry Development Programme (MIDP).

The aim of the APDP is to secure production of some 1.2 million light vehicles annually in South Africa by 2020 and at the same time stimulate the expansion of the supplier base in the country. To achieve this, APDP uses a range of instruments including import duties on imported vehicles and components.

Import duties

This is set at 25% for imported vehicles and 20% for imported components until 2020. There are rebates for some tariffs so their effectiveness at protecting a developing industry has been called into question. There are incentives for locally produced vehicles with further incentives if these are also exported.

It seems to be generally accepted that the target of producing 1.2m vehicles locally by 2020 will not be met and that the industry would need further support beyond 2020 if it is to thrive.

The country itself occupies the southern tip of Africa, bordered by Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe, with a coastline approaching 3,000km. South Africa is rich in minerals, metals including gold, uranium and diamonds and also has reserves of natural gas. Almost 80% of the land is used for agriculture with almost 70% permanent pasture, although water is in limited supply and droughts are a feature of the country’s climate.

The population is around 53 million. AIDS remains a problem and takes its toll among all ages as well as reducing average life expectancy, which is around 62 years according to the CIA World Fact Book. Despite the predominance of agriculture in the country, around 65% of the population is urbanised, according to the CIA and the largest urban area is Johannesburg with a population of around

Economic growth

Economic growth has slowed in recent years, reaching 1.5% in 2014 and 1.4% in 2015 according to the CIA and unemployment, poverty and inequality are among the highest in the world. Unemployment is around 25%, higher amongst young black people.

Unstable power supply is a problem in the country, which is a limiting factor in economic growth. There is a railway network, mostly narrow gauge, while the road network extends to 747,000km but only 21% of it is paved, which will undoubtedly affect the choice of vehicle in the country.

By contrast, the CIA describes the telephone system as the best developed and most modern in Africa, although less than half the population are Internet users.

Declining vehicle market

According to data from the National Association of Automobile Manufacturers of South Africa (NAAMSA), the total new vehicle market in 2015 reached 617,657, down -4.1% compared with 2014. Of this total, cars accounted for 412,550, -6.0% lower than in 2014. Light commercial vehicles accounted for 174,714 new vehicles, a slight 0.5% increase over 2014.

The decline in the vehicle market appears to have increased so far this year. NAAMSA data for January to April YTD shows that the total new vehicle market fell -9.7% compared with 2015 to 184,627, a decrease of 19,844 vehicles. The decline in new car sales is in line with this fall, with YTD sales down -9.6% to 124,475 from 137,649 in 2015. Light CVs now seem to be following the same path with sales also down -9.6% YTD TO 51,880 from 57,405.

Data for the month of April is not particularly encouraging either, with total new vehicle sales down -15.0% compared with April 2015. New car sales for April were down -14.8% to 26,077 from 30,598, while LCV sales fell back -16.0% compared with April 2015 to 12,192 from 14,514, so the outlook appears uncertain.

Looking at the trends in the South African new car market, sales peaked in 2006, before being affected by the global economic crisis with sales rising to a new, lower peak in 2014, followed by the current decline. It is difficult to get a full picture of the South African car market because not all sales are reported by manufacturer to NAAMSA. Two importers, Associated Motor Holdings (AMH) and Amalgamated Automobile Distributors (AAD), both part owned by the Imperial Group only report sales by market sector, not manufacturer. AMH imports brands such as Kia and Hyundai, as well as Renault and Mitsubishi, while AAD imports Chinese brands such as Chery.

From available NAAMSA data, it appears that the Volkswagen Group has the largest share of the South African car market, although there is no breakdown available for the individual VW brands, with Toyota the second largest. That opens the possibility that Toyota is the best-selling brand, but that is not certain. Both Toyota and VW offer a range of SUVs and pickup trucks that are likely to prove popular on a road network that is largely unpaved. Ford is the third largest with AMH and AAD sales combined exceeding Ford, suggesting reasonable volumes for Kia and Hyundai. Mercedes-Benz appears to be the largest premium brand, while other brands include GM/Isuzu Trucks, Nissan, BMW, Renault, Mazda, Honda, Suzuki, Jaguar Land Rover and Chrysler.

Developing fleet sector

In 2014, Automotive Fleet magazine reported that the corporate fleet market covered an estimated 1.2m vehicles, with approximately half that number under leasing or rental contracts. The report indicated that fleet operators had shifted from looking at vehicle price to considering the total cost of ownership and that risk management was receiving greater attention. South Africa has an historic problem with high levels of road accidents. The report also indicated that the treatment of business travel for tax purposes was under review and might bring a change in how company vehicles would be taxed.

The South African vehicle rental and leasing sector is represented by the South African Vehicle Rental and Leasing Association (SAVRALA). Rental members include international operators such as Avis, Europcar, Hertz and Thrifty, as well as local companies such as Afrirent Fleet Management and Bidvest. Leasing members include Fleet Africa, Liquid Capital, part of the Imperial Group and NedBank/Nedfleet.

Road tolling

One of the subjects that SAVRALA has been campaigning on for the past few years is the introduction of electronic tolling on some roads. SAVRALA is opposed to e-tolling on the grounds that the costings have been set too high and the end cost to road users would be unrealistically high when many are struggling financially.

The focus of concerns appears to be the Gauteng Freeway Improvement Project (GFIP) on roads around Johannesburg. E-tolling is currently in operation, but some drivers are refusing to pay their bills because there are allegations of collusion, price fixing and corruption. The disagreement has yet to be resolved, although the Government has introduced an e-tolling discount of 60% for a limited period. The Government’s view is that e-tolling will help to deliver better roads in South Africa.

Road safety

SAVRALA’s other major campaign concerns the South African Administrative Adjudication of Road Traffic Offences Act (AARTO). This covers the way in which road traffic offences are categorised and the penalties issued. The objective of AARTO was to decriminalise road traffic infringements. In place of criminal offences, AARTO would introduce a penalty points system, similar to that used in the UK. South Africa has some of the highest road accident and fatality records in the world and AARTO was designed to help make South African roads safer.

If a driver collects 12 points under AARTO, his or her licence will be suspended. If no penalties occur over three months, a penalty point will be deducted. If the licence is suspended three times, the licence is permanently removed. This could obviously have implications for fleet operators who would need to pay particular attention to driver behaviour issues. Although AARTO was passed into South African law in 1998, it seems it is not fully implemented across the entire country and where it has yet to be implemented, there are variations in how traffic law is applied.

Some fines applied under AARTO in the Johannesburg area were deemed to be illegal because the penalty notices had not been served through the South African postal system, a situation that persisted for a number of years. Ultimately, this led to a number of penalties being cancelled in 2015.