The balance of SA foreign trade turned into a very welcome surplus of about R5bn in May 2015. It apparently took the market by surprise, though it should not have, since the National Association of Automobile Manufacturers (Naamsa) had previously reported over 33 000 vehicles exported that month, more than enough to turn the trade flows.
Further good news came from Naamsa yesterday that reported 31 422 vehicles exported in June, another very good month for the motor manufacturing sector, the largest component of manufacturing generally, and the balance of payments. Export volumes of over 30 000 units now compare very well, with a satisfactory 50 251 units sold in the local market. Domestic sales numbered 47 868 units in May and June sales were about 1000 units higher, on a seasonally adjusted basis. However, as we show below, the vehicle cycle is clearly pointing to lower sales to come, with annual sales precited to fall from the current rate of 612 000 units to an annual rate of 523 000 units in June 2016.
This makes sustaining exports even more important for the industry and its dependents. The limits to exports are set by the willingness of the workers and their unions to stay on the job. The ability of the local industry to sustain its role in the global vehicle supply chain will depend on offering security of supply over the long run. The role of the unions in offering predictability of supplies from SA plants is clearly crucial. It is surely possible for the owners and the unions to come to terms on exchanging better paid jobs for reliability of attendance at work. Inevitably though, fewer person hours will be employed per vehicle produced as robots are substituted for more expensive labour, as is the case in manufacturing plants everywhere.
Yet if export volumes can be enhanced it may be possible to hire more rather than fewer workers – at better wages – even if the on average more expensively hired worker is made more productive with the aid of computer-driven equipment. The motor industry and the SA economy – in the form perhaps of a stronger rand – has much to gain from an infusion of self interested economic reality into collective bargaining. The reality is that it may be possible to provide well paid employment for a larger work force in some industries, if the opportunity to increase output for foreign markets can be taken. The highly competitive current rand exchange rate should encourage these negotiations. A better trade balance may well in turn help sustain the exchange value of the rand, which in turn would be very encouraging to domestic consumers. Additional demands from the households are even more essential to lifting SA GDP growth than are exports.
