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Looking to the future

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Some leaders of South Africa’s motor industry believe that an increasingly positive economic outlook will translate into market improvements in the second half of 2017. David Furlonger reports

Did you know that seeing the positive in every situation not only makes you more likely to achieve your goals but also affects the chemicals in your body and changes your physical cellular structure?

Neither did I – but the Institute for Conscious Thought insists it is so. If it’s correct, then the cellular and chemical make-up of some motor executives must be altering at a mind-blowing rate.

None more so than Francis Harnie, head of Peugeot and Citroën activities in South Africa. Despite just enduring a wretched 2016 which culminated in Citroën pulling out of the market with immediate effect, he is enthusiastic about the local future for Peugeot.

Harnie’s zeal is fuelled mainly by strategic plans at the French parent company. After a sustained period of financial losses, it is trading profitably and ready to invest again in emerging markets like South Africa.

Harnie says there will be a flurry of new vehicles here, of which at least three will be sports utility vehicles. These will include diesel versions, specially engineered to handle South Africa’s out-of-date, high-sulphur fuel. “We will have a product line-up to match any local manufacturer,” he says.

What he won’t have is their protection against the vagaries of the rand. Companies that both import and export have a natural currency hedge. Specialist importers don’t – which is why so many have seen sales plunge as rand-related costs have caused prices to spiral.

Fewer than 200 Citroëns were sold in South Africa in 2016, making the brand’s departure inevitable. For now, Harnie will be free to concentrate on rebuilding the Peugeot customer base.

“We have been in transition between the old and new parent company and between old and new products,” he says. “We are starting afresh. Once we are strong enough again locally as a company, we will consider reintroducing Citroën.”

As I observed in my last column, 2016 was not the disaster it might have been for the local motor industry. Record vehicle exports more than compensated for an 11,4% drop in domestic demand.

However, exports are merely a sticking plaster. On their own, they don’t justify billions of rands worth of investment. Long-term, there is no substitute for a growing, vibrant local market.

Last year was the third in a row that sales declined. In 2013, the industry sold 649 216 cars and commercial vehicles to local customers. By 2016, this was down to 547 442.

Many independent analysts think the market will be flat in 2017 and may even shrink slightly before commencing a slow, steady recovery from 2018. General Motors SA takes a similar view. The company, which shed just over 100 staff members late last year after a voluntary-separation exercise brought about by low local demand exacerbated by almost negligible exports, says this year’s market will be stagnant.

Mike Whitfield, head of Nissan operations in Sub-Saharan Africa, is more buoyant. As president of the National Association of Automobile Manufacturers of SA (Naamsa), he shares its view that an upswing could start in the second half of this year.

Other senior executives say the same, even if their hearts doesn’t seem to be in it. If they’re not singing “Always Look On The Bright Side Of Life,” they are at least pretending to hum it.

Whitfield says: “We will start seeing a more positive economic outlook that will translate into second-half market improvements.”

But that will depend on a positive environment – like stronger GDP, commodity prices, rand, fixed investment and private consumption expenditure. That’s a lot of “ifs.”

Whitfield is also a “glass-half-full” person when it comes to the rest of Africa. Local exports to the north have collapsed over the last two years as tumbling oil and commodity prices have stripped economies of the cash and foreign exchange required to buy vehicles.

“Last year was one of the most challenging in recent times for Africa,” he says. “But we are starting to see some positive signs in countries like Kenya. One thing about this continent: as fast as economies go down, the upside can be just as dramatic. Some countries could have double-digit growth this year. I remain positive.”

So does GMSA, but not so immediately. The short-term outlook for Africa remains subdued, it says. “However, in the long-term there remains opportunity for growth in Africa as disposable income levels improve, and more countries experience political stability and invest in the development of infrastructure.”

 

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