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Johannesburg - South Africa's beleaguered automotive sector and the department of trade and industry (DTI) will set up a task group in the next 10 days to address the sector's crippling cash-flow crisis.
The task group comprises the National Association of Automobile Manufacturers of SA (Naamsa), the National Association of Automotive Component and Allied Manufacturers (Naacam), the DTI and possibly other as yet unconfirmed parties.
The team will finalise its proposal by March 6 and present it directly to the Minister of Trade and Industry, Mandisi Mpahlwa.
This follows a two-hour meeting between representatives of the car sector and the minister on Tuesday evening. Naacam president Stewart Jennings said that the meeting was "constructive". He added that the DTI was "very attentive and empathetic" to the issues raised by the auto sector representatives.
"Cash flow and finding working capital are two of the biggest concerns to the auto sector at present," said Jennings. In the component manufacturing sector alone, 10 000 jobs have been lost in the past six months. Another 22 500 jobs across the sector are on the line, according to media reports.
South Africa's automotive industry - comprising both component and vehicle makers - was hit by the progressive increase in interest rates between June 2006 and mid-2008, which hurt demand for its products.
The slump in demand for new cars was illustrated by January's vehicle sales figures. New vehicle sales in January 2009 dropped by 35.4% when compared with the same time in 2007. This was larger than the 27.1% drop in December and made it the worst January performance in eight years, according to Naamsa.
At the time, the industry described the situation as "critical", with Naamsa saying that the entire automotive value chain was confronted by a cash-flow and viability crisis.
Kolbenco, a company which makes pistons used in internal combustion engines, closed its doors owing to the crisis. "It's an example of an industry that may never be re-established in South Africa again," said Jennings.
- Fin24.com