Africa is fast becoming a competitive trade and export destination, especially from a South African perspective. The opportunity for growth and business partnerships for South African automotive manufacturers are also increasing. This is good news for local businesses that have faced challenging markets and low investment levels in South Africa.
The average annual growth for sub-Saharan Africa is predicted to stay above 4% until 2024. Several industries will drive this growth, including manufacturing, telecommunications, agriculture and mining. East Africa will be highly influential in this growth; a region with which South Africa already has trade agreements in place, many of which are for automotive components.
East Africa a positive prospectus for South African exporters
“Most importantly, Africa provides a market for South Africa’s manufactured exports – the country’s value-added exports to Africa account for about 35% of total manufactured exports,” says managing director of research and consulting firm Africa House, Liz Whitehouse.
“This growth, coupled with the relative stability in [East Africa], has attracted foreign investments and countries such as Ethiopia and Kenya have seen important investments in industrial capacity in the past few years,” explains Whitehouse. German vehicle manufacturer, Volkswagen, has also seen this potential and has opened an assembly plant in Kenya. Formex supplies automotive components directly to Volkswagen.
African economies growing steadily
The latest International Monetary Fund (IMF) data predicts that sub-Saharan Africa will have five economies with gross domestic products (GDPs) that exceed $100-billion per year, by the year 2021. These five countries are South Africa, Nigeria, Kenya, Angola and Ethiopia. Four other countries – Tanzania, Ghana, Côte d’Ivoire and the DRC – should have GDPs exceeding $50-billion.
This growth of African economies is good news for trade markets. The continent’s top import markets will see increased investment from countries such as China, Russia and India. South Africa and Angola share 19% of China’s key supplier market. The automotive industry can benefit from these trade relations with BRICS countries. As the markets grow, more investment and business opportunities will present themselves for African automotive manufacturers.
Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.
Formex specialises in producing components for the catalytic converter industry, as well as metal components and assemblies for the various vehicles. Formex aims to become one of the foremost suppliers for the South African automotive industry by 2035, aligning itself with the South African Automotive Masterplan (SAAM) which takes effect in 2020.
Formex is a Level 2 B-BBEE supplier with over 80% black ownership, of which more than 40% are black women. The company is owned by Deneb Investments Limited – a subsidiary of Hosken Consolidated Investments Limited (HCI) – one of South Africa’s biggest true B-BBEE companies listed on the Johannesburg Stock Exchange (JSE).