AMSA closure: Blow to SA'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.