Research by Wits shows buying only South African made vehicles could boost GDP by R37 billion

New research by the University of the Witwatersrand (Wits) shows that a government policy of buying only locally produced cars, bakkies, buses and trucks at national and provincial government level could, through various multiplier effects, increase South Africa’s gross domestic product (GDP) by R36.8 billion a year it has been reported after a radio interview.

The policy could also have a one-off positive growth impact of 1.18% on GDP, result in a 1.35% improvement in the trade balance, increase direct employment in the automotive manufacturing industry by 0.75% and improve the budget deficit by 9.13%, owing to an increase of R3.14 billion in national tax revenue, according to the report.

The research, based on 2017 numbers, was conducted by Wits postgraduate student Lourens Weyer, at the School of Economics and Business Sciences, under tutelage of the head of the school, Professor Jannie Rossouw.

South Africa is fast approaching a fiscal cliff, says Rossouw, which is defined as the point where civil service remuneration, social security grants and interest payments on government debt, account for 100% of government tax revenue. Currently these three items account for some 70% of the government’s tax revenue.

One example where savings can be recorded is expenditure on imported vehicles purchased for the government vehicle fleet at national and provincial government level, he notes. In 2017, around 25% of vehicles purchased for national and provincial government use were imported.

“These vehicles can easily be substituted by the purchase of locally produced vehicles. A number of these imported vehicles were luxury vehicles for use by high-ranking officials,” says Weyer.

“Government has asked the public to make a sacrifice, through the increase of VAT from 14% to 15%, for example. Why can politicians not also make some sacrifices and a marginal sacrifice to boot?” asks Rossouw.

“Certainly it should be a non-negotiable to buy local. National and provincial government officials can buy imported vehicles in their personal capacity, but should definitely buy local on an official level,” adds Weyer.

The range of locally produced vehicles includes several buses and trucks, as well as the Volkswagen Polo, Polo Vivo, Isuzu bakkie, BMW X3, Mercedes-Benz C-Class, Nissan NP300 bakkie, Nissan NP200 half-ton bakkie, Ford Ranger bakkie, Ford Everest, Toyota Quantum minibus, Toyota Fortuner and Toyota Hilux bakkie.

R540 000 on average
The data used in the Wits study was sourced from research firm Lightstone Auto, and incorporates the fact that the local parts content on locally produced vehicles is around 35%.

Lightstone Auto reports the vehicles purchased at national and provincial government level in considerable detail, including manufacturer, make, type, model and body shape.

In the calculation of government spending on imported and locally produced vehicles, the retail prices of the vehicles were used. However, actual expenditure might deviate, as government qualifies for special, unspecified discounts, notes Weyer.

From the research it is evident that there has been a decline in yearly government fleet purchases of imported vehicles from 2012 to 2016. Purchases declined from 8 503 units in 2012 to 4 516 units in 2017. Passenger vehicles made up the largest portion of imported vehicles from 2012 to 2017, followed by light commercial vehicles, medium commercial vehicles and extra-heavy trucks.

The average price of an imported passenger car purchased by government in 2017 was
R540 396. The average price of a light commercial vehicle, such as a bakkie or van, was R491 766.

There has been a similar decline in the number of yearly government fleet purchases from local manufacturers, says Weyer, at 17 448 vehicles in 2012, to 13 427 units in 2017.

Analysis of the Lightstone Auto data shows that South Africa’s national and provincial government spent some R2.6 billion on imported vehicles in 2017, while spending on locally produced vehicles amounted to roughly R6.2 billion. The total number of locally produced vehicles in South Africa for 2017 was 601 178 units.

It should, therefore, be easy for the local industry to absorb an additional 4 516 units a year, says Weyer.

In mulling a possible expansion of the study, Weyer and Rossouw are contemplating adding municipal vehicle acquisitions to the mix.