21 November 2022 — Vehicle affordability in South Africa is set to improve over the next couple of years as local and global economies continue to recover from the COVID-19 pandemic, writes Ghana Msibi, CEO of WesBank, as he shares his insights and thoughts following the successful naamsa | South African Auto Week, held at the Kyalami International Convention Centre recently.
As the South African GDP continues to take strain and our inflationary forecast sees two interest rate increases within the next six months, we believe the situation in the local economy will begin to improve with decreases in the repo rate and that the economy will normalise in 2024.
We also expect the supply shortage of certain automotive components such as semiconductors to improve in the medium term and for the current logistical turmoil in the world to ease, together with lower shipping costs. These developments will help world economies, including South Africa, by cutting operating costs.
An important development will be when China, with its zero COVID-19 policy and related manufacturing plant shutdowns, starts firing on all cylinders. This will be a major factor in improving component availability for the entire global automotive industry and its related economies.
The improving global and local economic situations will be beneficial in improving vehicle affordability, but locally there are calls from consumers and industry commentators for the government to cut duties and taxes to improve affordability. However, the government’s finances are currently so constrained that they will be hard stretched to make these cuts. I believe what is needed are infrastructural projects that will not only boost the economy but also create jobs and much needed employment. This, in turn, will mean more people paying tax to grow the fiscus.
There has been a substantial increase in market activity in 2022 compared to 2021, evidenced by surprisingly good new vehicle sales figures, and we expect this activity to grow in 2023, to the benefit of consumers.
Within WesBank, we see a move to a ‘clicks and mortar’ model for most of the staff in 2023 as business and banking organisations come to terms with a combination of digital and personal interaction with consumers. The bank will continue to operate with the more fluid hybrid model of splitting working hours between home and office, as personal relationships with customers remain important. COVID-19 did not influence these changes. They were inevitable, but it certainly accelerated the process.
While continuing with the theme of forward thinking, New Energy Vehicles (NEVs), which use expensive batteries, are creating a whole new world for vehicle finance. At this stage, the complete car will be financed but, depending on risk assessment over time, it could result in separate financing for the car without the battery and financing the battery separately. This could give rise to an adjacent market, as is the case with us financing a warranty or replacement tyres.
WesBank is also preparing to put more focus on its operations in other Southern African Development Community (SADC) countries, in line with the implementation of the African Continental Free Trade Area. We are already well represented in these markets and now is the time to improve the efficacy, in line with what we are doing in South Africa. This presents us with many opportunities for developing our footprint in these regions.
I am the quintessential optimist. A case study of South Africa over the past 30 years will demonstrate the resilience of South Africans. Against all odds – and there have been plenty of challenges in this time – we will pull through together. We have seen this as we recover from the COVID-19 pandemic and will do so as we engage with major transitions in the spheres of NEVs and a transforming automotive industry.
