The high raw material prices and strengthening of the rand have had a detrimental effect on South African automotive component manufacturers and some firms may be forced to lay off workers and cancel export contracts.

The high raw material prices and strengthening of the rand have had a detrimental effect on South African automotive component manufacturers and some firms may be forced to lay off workers and cancel export contracts.

According to National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Clive Williams, growth in the automotive components sector, which became the second-largest contributor to GDP at 6,3 per cent last year, is under threat.

reported on Friday that one of the major component manufacturers, Dorbyl, has already laid off more than 200 employees.

CARtoday.com reported that a delegation of South African automotive component makers would visit the United Kingdom next month to present British manufacturers with investment opportunities in SA. The move follows a visit by an SA automotive components delegation to Japan earlier this year where it was found that there was “exceptional” interest in further investment in South Africa after the extension of the Motor Industry Development Programme to 2012.

Exporters in the sector were desperate to improve their competitiveness, because suppliers in competitor countries such as Brazil, Malaysia and Hungary were trying to muscle in on the contracting global automotive market.

Vehicle assembler Delta, for example, had told Dorbyl that it could now import some components from Brazil cheaper than it would cost Dorbyl to make identical components.

Williams attributed much of SA’s uncompetitiveness to the “monopoly” that major raw material suppliers, including Sasol, Columbus Stainless, Iscor and BHP Billiton, enjoy in their respective markets. Prices on Iscor flat steel products rose between 13,4 and 29 per cent last year.

He said the industry had also been dealt a heavy blow by the stronger rand, which had been propped up by high interest rates. As CARtoday.com reported earlier this year, several companies that had signed export contracts when the rand was at R12 to R14 to the dollar were now struggling to remain profitable.

Original article from Car