Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers (NAACAM) joins CNBC Africa’s Zanele Morrison for this discussion.
The next conversation is around the announcement of the imminent closure of Acelol Metals South Africa operations. They are looking at closing the Newcastle blast furnace with potential ripple effects on the automotive sector and the broader economy. We want to explore a number of factors, job losses, impacts on steel-reliant industries, local and international alternatives that will be affected or come in to fill the gap. For expert insights and analysis on the situation, we are joined by Renai Moothilal, CEO of NAACAM. Renai, the losses are staggering and I think you would do well by helping us to understand the implications and the numbers involved in this particular closure. Renai Moothilal, CEO of NAACAM South Africa Yeah, afternoon, Zanele. Thanks for having me. You're right. It's not necessarily the most positive way for, at least in the automotive manufacturing space and I think wider manufacturing in South Africa to kind of kick off the year. Acelol Metal and its predecessor in South Africa, ISCOR, has a very long history of supporting our manufacturing objectives. And I think like you touched on, immediately you're looking at should that blast furnace in Newcastle close, not just the 3,500 jobs impacted at the furnace or the plant level there with AMSA, but immediate impacts across the base in my own sector, in the autos component space. Our assessment is should that shutdown go ahead as expected at the end of this month, it's more than likely that immediately we've got 3,000 jobs at risk and probably as we go through towards the end of 2025, up to 13,000 based on the type of components that are likely to be impacted. So yeah, it's quite a serious issue. It's one that has been on the table for some time. It's not the first time they've announced that they're looking to close that plant. But as a sector, we were confident during the course of last year that some sort of resolution was on board through the engagements with the relevant authorities and kind of went towards the end of 2024, not thinking that this was going to be the immediate problem. And it's not ideal that you get kind of a two or three week notice to find alternate plans. I mean, I'm sure lots have been said and enough has been said, and perhaps industry not really hearing how big the challenge is. But Renee, we're talking about the model of industry, the value chain here is quite long. So are we looking at an impact that we're going to see right down to the performance of the country itself? Because it's a huge industry, be it local, be it international exports, be it the cost. And just generally, there's a role on here that we can't see. Can you paint a picture of what that means just outside of what we see for motor manufacturing? Yeah, I think absolutely. You've hit the nail on the head. I think the auto sector in South Africa and globally is one of the most interconnected value chains, especially from a manufacturing perspective. Here in South Africa, you've got probably somewhere around 180 direct suppliers to automotive assembly plants and innumerable number of smaller, let's call them lower tier suppliers. So the value chain is quite extensive. It contributes significantly to the country's GDP in terms of the export basket. You're looking at an auto export basket, I think makes up about 15% of the country's manufacturing exports. So it's a really, really key sector. The kind of impact that we're talking about, the moment you start, you would understand this, you can't assemble 99% of a vehicle. If one critical component is missing and you can't find a way of timeously substituting for that, you run the risk of shutting an entire vehicle assembly line and then you've got all the other hundred of component manufacturers being impacted by those volume cuts. The sector has not kind of benefited from significant volumes over the last year or so. We've seen volumes decrease for a range of reasons. And I think this is probably just another one of those challenges that we wouldn't have wanted to see. You know, in previous discussions that we've had, there was always conversations around policies to enable the industry to thrive, competitiveness, and what's not being said clearly enough is, is it problematic? Is it not being done at a fast enough pace to ensure that the sector thrives? What is your stance now on the implications of not rising up to policy and protection that's required? Yeah, I think this particular one is, it's not a kind of fair. I think the steel production environment in South Africa, including the kind of products that are being spoken about is facing a challenge globally in that there's significant levels of capacity in terms of steel manufacture. And the kind of products that Arsenal Metal is looking to close into the auto's value chain are really high tech, require a level of specialized input and production that they kind of have been struggling to make a business case work. Having said that, having said that, the reality is if we are serious about having a long-term vibrant auto's economy of which I'm a very, very big fan and advocate of, because of the numerous economic benefits that comes out of auto's production. I believe the country as a whole, all stakeholders kind of need to be serious and say, listen, what are our key strategic inputs? Where does our extra advantage start and end? And how do we find ways of supporting that? So for me, the discussion right now is not so much about Arsenal Metal, the company, but it's more about the asset and the kind of products that are coming out of that plant and how is it our supporters in the government space who are very clear about wanting, I mean, we've got an SA auto's master plan up until 2035. So there's very clear direction. We want to see the sector grow, but at the same time need kind of quick responses to find ways of protecting the products that are needed in auto's manufacturing and do not, I think our biggest ask right now is that a two or three week notice period to find alternate plans. Suppliers only have maybe three to six months of stock that they can work. You need at least a 12 month offer period. You need stock to build up. You need to be able to find alternate suppliers. They don't exist in South Africa right now. It's quite conceivable. My biggest concern is that you could have a situation where customers are not going to substitute a material. They're simply going to say, let's import the finished component here into South Africa and get it onto an assembly line. And we've got lower levels of local content and less economic. So I think the point is made, it is something we'd like to see addressed at policy and at business relationship level. And again, we regress after having made so much progress in the sector. So now the question is, what can be done to buy us more time to be able to not lose out completely and for the value chain and for everybody involved to lose out? What is being done? What can be done? I think there's a lot of high level discussions going on at the moment. I wouldn't want to presuppose and jump into what some of that is. As a sector, both ourselves and the OEMs are very clear. Whatever it is, find ways of ensuring that sufficient time and sufficient buffer stock is available. Whether state mechanisms like the IDC or whoever the agencies are that can step in to support all of this, we would like to see that happen and decisions made with a level of urgency. Thank you so much, Rene. I think, as you said earlier on, we really need to show that we are serious about industrialisation, and this perhaps could be what pushes us to find ways and to bet on the right solutions. Thank you so much for your time, Rene Muthilal, the CEO of NatCam.
Theme: Impact of AMSA Closure on South Africa's Automotive Sector
The South African automotive sector is facing a period of uncertainty with the imminent closure of Acelol Metals South Africa operations, particularly the Newcastle blast furnace. This closure could have significant ripple effects on the automotive industry and the broader economy. The closure is expected to result in job losses, impact steel-reliant industries, and create challenges for local and international alternatives to fill the gap. Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers (NAACAM), provided expert insights and analysis on the situation during a recent interview with CNBC Africa. The implications of the closure are staggering, with potential job losses estimated at 3,000 initially and up to 13,000 by the end of 2025. The closure of the blast furnace would not only impact the 3,500 jobs at the plant but also have immediate repercussions on the automotive component space and the broader manufacturing sector in South Africa. Moothilal emphasized the interconnected nature of the automotive value chain and highlighted the extensive impact that the closure could have on the country's GDP, particularly in terms of manufacturing exports. The automotive sector plays a significant role in contributing to the country's export basket, making up about 15% of manufacturing exports. The closure of the blast furnace could disrupt the entire vehicle assembly line and affect hundreds of component manufacturers, leading to further challenges for the sector that has already experienced a decrease in volumes over the past year. Moothilal also discussed the policy environment in South Africa and the need for strategic interventions to support the long-term sustainability of the automotive industry. While acknowledging the global challenges in the steel production environment, he emphasized the importance of protecting the specialized products that are essential for auto manufacturing. He called for urgent responses from all stakeholders, including the government, to address the current challenges and ensure the continuity of the value chain. Moothilal expressed concerns about the short notice period given for the closure, highlighting the need for sufficient time and buffer stock to mitigate the impact on suppliers and prevent potential import substitution. He called for decisive actions to protect the sector and avoid losing the progress that has been made in recent years. In response to questions about the ongoing discussions and potential solutions, Moothilal emphasized the importance of urgency in decision-making and the need for collaboration between industry players and government agencies to find viable solutions. The closure of AMSA operations poses a significant challenge for the South African automotive sector, requiring collective efforts to mitigate the impact and secure the future of the industry.
"The closure of AMSA operations poses a significant challenge for the South African automotive sector, requiring collective efforts to mitigate the impact and secure the future of the industry."
['South Africa', 'automotive sector', 'AMSA closure', 'manufacturing industry', 'job losses', 'economy', 'steel production', 'policy environment', 'economic impact']